Salaried employees have certain advantages over hourly workers. Employees on salary do not lose any pay if they have to miss a few hours of work, for example. In return for these advantages, many salaried employees lose the right to overtime pay, with their employer gaining an exemption from overtime requirements. This exemption covers many, but not all, salaried employees.
Unless an employee is exempt, employers owe overtime pay for all labor that exceeds 40 hours over the span of a work week. Overtime pay is 1.5 times the regular pay rate of a non-exempt employee. Workers in a few occupations, such as farmworkers, are exempt from overtime coverage based on federal regulations. However, in most cases an exempt employee is a salaried employee. Several factors determine whether employees' salaried status, in fact, makes them exempt, in which case their employer would not owe them extra pay regardless of their hours worked.
Employees are exempt from overtime coverage only if they make a certain amount per year. In 2011, this minimum amount was $455 per week, or $23,660 a year. Employees who make less than this amount must receive overtime pay for any week in which they work more than 40 hours. Employers would calculate those employees' overtime pay rate by figuring their hourly rate --- for example, dividing their salary by 52 weeks and then by 40 hours --- and multiplying that rate by 1.5.
Regardless of compensation, employees are exempt from overtime provisions only if they have particular job duties or roles. These duties generally must fall into the categories of executive, administrative or professional. An executive employee typically is a boss or company official. An administrative employee might work in a company finance department. A professional employee could be a doctor, lawyer, teacher or author, among various examples. Regulators might refer to these three exemptions collectively as the "white collar exemption" because they cover many white collar employees who earn salaries. Similar exemptions apply to outside salespeople, as well as to certain computer professionals. In addition, any other employee who makes at least $100,000 a year is exempt.
Employers should be careful not to tinker with an exempt employee's salary in an unauthorized manner. Doing so could nullify the exemption and require overtime pay when applicable for the employee. Employers cannot reduce a salaried employee's pay if the employee misses a few hours or even a few days. Only an absence of a full week automatically justifies a pay reduction. An absence of a day or more can allow for a salary reduction if the reason is personal and not due to illness or disability, and employers also can impose financial sanctions on employees as bona fide disciplinary measures. Employees who show up ready to work must receive their regular salary even if little or no work is available.