“Salary Basis Test”

What Is the Salary Basis Test?

The Salary Basis Test is a criterion used by the Fair Labor Standards Act (FLSA) to determine whether an employee qualifies as exempt from overtime pay requirements. It mandates that an employee must receive a predetermined amount of salary per week, regardless of the number of hours worked, to be considered exempt.

Qualifications for Salaried Employees

A worker who is paid a predetermined amount of money from their employer is regarded as salaried employees. The amount is paid in a regular fashion via a monthly paycheck or bi-weekly pay. Employees who are salaried must be paid for every week they are working. This type of employee typically does not have the right to extra pay in the event that they make less than $23,660 per year.

Falsely identifying an employee could cause penalties and fines for the state. The employee has the right to overtime pay when they are classified incorrectly as a salaried employee by the employer. Employers should be sure that they read and understand the rights of a salaried worker at the state level prior to making a decision about whether to classify a salaried employee.

Treatment of Salaried Workers

To be considered to be a salaried worker the employee must be receiving an ongoing set amount of pay or compensation, known as “salary,” from their employer. The length of the pay period is according to the employer. It could be monthly, weekly, bi-weekly, or monthly. The salary of salaried employees is not impacted by the number of hours they are working. In the typical 40-hour week, salaried employees receive the same pay regardless of whether they work 35 or 45 hours.

Employees who are salaried do not have to put in the usual 40-hour week. Their hours of work can change according to their job tasks. Since their compensation is not dependent on the number of days they are working, salaried workers generally don’t have to adhere to a strict work schedule. They don’t have to clock in at work or maintain a timesheet for submission. With Superworks, managing payroll for salaried employees becomes seamless, allowing for greater flexibility in scheduling without the hassle of tracking hours.

FAQs

What is the minimum salary threshold for the Salary Basis Test?

As of January 2022, the minimum salary threshold for exempt employees under the Fair Labor Standards Act (FLSA) is $684 per week, or $35,568 annually. This threshold may be adjusted periodically by the Department of Labor.

What happens if an employer violates the Salary Basis Test?

If an employer misclassified an employee or fails to adhere to the Salary Basis Test requirements, they may be subject to legal penalties. This can include back pay for unpaid overtime, adjustments to in hand salary, fines, and other legal ramifications.

Can bonuses and incentives count toward the Salary Basis Test?

Yes, bonuses and incentive payments can be used to satisfy a portion of the Salary Basis Test, provided they meet certain criteria. For example, nondiscretionary bonuses based on predetermined criteria can be included in the calculation of an employee’s salary.

Are there different Salary Basis Test requirements for different exemptions?

While the basic principles of the Salary Basis Test apply to most exemptions under the FLSA, there may be specific requirements or variations for certain exemptions. Employers should carefully review the criteria for each exemption to ensure compliance.

Is the Salary Basis Test applicable to all types of employees?

No, certain categories of workers, such as hourly employees, seasonal workers, and certain agricultural and domestic workers, are generally not subject to the Salary Basis Test as they are entitled to overtime pay regardless of their salary status.

Can salary deductions affect an employee’s exempt status retroactively?

Yes, improper deductions from an employee’s salary can jeopardise their exempt status retroactively. If an employer makes unauthorized deductions, the employee may lose their exempt status for the entire period during which the deductions occurred.

Also, See: Superworks glossary