What Does it Mean to Be Paid on a "Salary Basis?"

Getting paid a "salary" generally means getting the same amount of pay each week or each pay period no matter how many hours an employee works that week. For example, an employee on salary gets paid the same if he or she works 10, 30, 39, 40, or 46 hours per week (or any other number of hours).

With a few exceptions, a salaried employee cannot have his/her salary reduced based on the "quality or quantity" of work performed. For example, if an employee gets a salary of $400 per week when he or she works 40 hours, an employer cannot pay the employee $350 when s/he works 35 hours (effectively paying the employee $10/hour rather than a salary of $400 per week).

An employer who makes improper deductions to an employee's salary may destroy the "salary basis" of pay and may make the employee nonexempt and entitled to overtime.

An employee is not paid on a salary basis if his/her salary is "subject to" reduction for reasons inconsistent with the salary basis of pay. Thus, if an employer actually does dock employee salaries, or if there is a specific employment policy requiring reductions in salaries in specified situations, the employer may destroy the salary basis of pay.

Whether an employee is paid on a salary basis is not affected by whether pay is expressed in hourly terms (as this is fairly common in many payroll computer programs), but whether the employee is in fact paid a "guaranteed minimum" amount that is not subject to being docked based on the quality or quantity of work performed.

The salary basis pay requirement for exempt status does not apply to some of the "learned professions," such as lawyers, doctors, or school teachers. These jobs are exempt even if the employees are paid hourly. Another exception is for "computer professionals" (as defined under the law), who may be exempt if they are paid on a salary basis or if they are paid hourly at a rate of at least $27.63. Further, the FLSA also allows some exempt employees to be paid on a fee basis, but this is a fairly rare circumstance.