What is a Salaried Employee?

All About Salaried Employees
All About Salaried Employees. Cultura RM Exclusive/Frank and Helena/Getty Images

A salaried employee is a special kind of employee in today's workforce. Salaried employees come in several varieties, but their ranks are dwindling as labor laws restrict the definition of salaried and exempt, as we'll discuss below. 

What is a Salaried Employee? How are Salaried Employees Paid?

A salary is a regular payment to a worker. So, a salaried employee is defined as a worker who is paid a salary.

 

These salary payments are made at regular intervals (monthly, bi-monthly, or semi-weekly) based on a pay amount that is expressed as an annual amount. For example, if you asked Joe, a college professor, he would say he has a salary of $86,000. He is paid every other week (26 times a year) at a rate of $3,307.70 per paycheck. 

Do Salaried Employees Work Overtime? 

The basic work law (the Fair Labor Standards Act - FLSA) requires that employees be paid overtime for any hours worked over 40 hours in a week. But most salaried workers are in a special classification set by the Department of Labor as "Exempt" employees. That means they are exempt from overtime. The DOL says that job title and the fact that an employee is paid a salary does not mean the employee is exempt. 

The DOL has specific categories of salaried employees who may be considered exempt: 

employees employed as bona fide executive, administrative, professional and outside sales employees.

For example, Joe, the college professor, is required to teach two classes and write papers for publication. He works at those tasks to get them done as well as possible, in order to get salary increases and promotions. If the college is on a break, he still gets paid. If he has to work many hours in a week grading final exams, he doesn't get extra pay for that time.

 

New Regulations Would Change Salaried Employee Pay

UPDATE: In 2016, the Department of Labor proposed new regulations that would make lower-paid exempt employees eligible for overtime. A federal judge has stopped these regulations - for now. There is no word yet on when or if the regulations will go into effect. The new regulations required that  salaried/exempt employees earning less than $913 a week ($47,476) would be eligible for overtime.

Currently (before the new regulations) the Department of Labor's specific minimum amount of pay for salaried employees to be considered as exempt was $455 per week, equivalent to an annual salary of $23,660. The current regulation that salaried employees earning less than $455 per week must be eligible for overtime, but this does not apply to outside sales employees, teachers, and employees practicing law or medicine. 

In terms of paying exempt employees, the DOL requires that an exempt employee receive full salary for any week in which the person performs any work, even one hour. But, exempt employees don't need to be paid for a week in which they do no work.

Do Salaried Employees Have a Contract? 

Many salaried workers have employment contracts, but some do not.

The existence of a contract depends on the level of employment (almost all executives have contracts) and the type of position. Joe, who works as a professor at a college, probably does have a contract. 

The typical employment contract for a salaried employee will include salary, possibly days and hours of work, paid time off, general responsibilities, situations for termination, and special agreements for confidentiality and non-competition. 

How is Salaried Worker Time Recorded? 

Because salaried workers are paid annually, and by the job, not the hour, their time is not recorded. But some salaried employees may not be exempt from overtime, as discussed above. These employees must record time for the purpose of receiving overtime pay. 

Do Salaried Employees Get Employee Benefits? 

Salaried employees usually get employee benefits, including paid time off and health plan benefits.