A salary employee is a worker who is generally paid a set monthly or annual salary as opposed to being paid an hourly wage. Salary employees are generally classified as "exempt" under the Fair Labor Standards Act. Exempt employees work in a variety of positions and include executives, sales employees and certain computer professionals. The worker's duties and salary are the two main determinants of whether that worker is exempt under the Fair Labor Standards Act.
The Fair Labor Standards Act regulates wages and hours in the United States. The act covers payment of overtime and establishes a federal minimum wage to ensure workers are properly compensated for time worked. It also requires equal pay and regulates child labor to ensure minorities and children are not exploited in the workplace. Salary employees are generally paid at a much higher rate than hourly employees, which is part of the reason why they are often exempt from Fair Labor Standards Act.
One method of determining whether a salary employee is exempt from the Fair Labor Standards Act is the duties test. Consider only those duties which the employee actually performs. Do not base your assessment only on the worker's job description, as this may vary from the duties the employee actually carries out. Duties which may make a salary employee exempt include making executive-level decisions, including financial decisions, as well as hiring and firing employees.
Wage and Hours
A salary employee is paid the same amount no matter how many hours she may work. While she may work long hours at times for no additional pay, the salary worker also receives the same compensation during non-peak times when fewer hours are required.
Although it may be tempting to take advantage of salary employees, forcing them to consistently work long hours does not pay off in the long term. Additionally, it is important to verify a salary employee's exempt status on a regular basis to ensure he still meets the requirements. Finally, remember that many states have their own labor standards which may or may not afford workers a higher level of protection than that of the federal level. You must comply with both state and federal laws when employing salary workers.