How Does Salary Pay Work?
Salaried employees receive a predetermined amount of money, known as their annual salary, divided over specific pay periods, such as bi-weekly or monthly. This means they are paid consistently, even if the number of hours worked in a week fluctuates. For employees working on a salary basis, the amount of compensation they receive each pay period is calculated based on their annual salary. This salary is typically negotiated when they are hired and remains fixed unless there is a promotion or salary adjustment.
Salaried employees may be expected to work more than a certain number of hours a week without receiving additional pay, unless they qualify for overtime pay.
What Are Exempt Employees?
In the U.S., the Fair Labor Standards Act (FLSA) sets a salary threshold to determine whether employees can be classified as exempt from overtime pay. As of 2024, the FLSA's minimum wage threshold is $844 per week, which amounts to $43,888 annually. Employees earning less than this threshold, regardless of their job duties, are typically classified as non-exempt and must receive overtime pay for hours worked over 40 in a week.
For an employee to be exempt from overtime, they must meet both the salary threshold and job duties criteria outlined by the FLSA. If they earn below the threshold, they are generally entitled to overtime pay, even if their job involves administrative, professional, or executive responsibilities.
What Is The Difference Between Salary Pay vs Hourly Pay?
| Criteria |
Salary Pay |
Hourly Pay |
| Payment Structure |
Fixed annual amount, divided into regular pay periods. |
Paid per hour of work; the rate of pay varies based on hours worked. |
| Income Stability |
High: Consistent and predictable income. |
Low: Income fluctuates based on hours worked. |
| Tracking Hours |
No need to track the exact hours worked. |
Hourly employees must track their hours to calculate pay. |
| Job Title |
Professional, managerial, and executive roles. |
Retail, service industry, manual labor, entry-level roles. |
| Work Hours |
Usually expected to work standard hours, may work more without extra pay. |
Paid only for actual hours worked, including overtime. |
| FLSA Classification |
Typically classified as exempt if they meet job duty and salary threshold criteria. |
Typically classified as non-exempt, entitled to overtime pay. |
The Pros And Cons Of Salary Pay
Salary pay is important for both employers and employees because it offers predictability and consistency. However, this pay structure can lead to overworked employees who feel compelled to work more hours. Here are key advantages and disadvantages of offering salary pay to your employees:
| The Pros Of Salary Pay |
The Cons Of Salary Pay |
| Employees receive consistent pay, regardless of hours worked. |
Many salaried employees are not entitled to overtime, even when working more than 40 hours. |
| Employers do not need to track hours for salaried employees. |
Salaried employees may feel pressure to work more hours without additional compensation. |
| Regular pay periods can increase employee retention. |
Employees cannot earn more by working extra hours. |
| Salaried employees are often motivated to complete tasks rather than watch the clock. |
Employees may be overworked due to the absence of hourly limits on work. |
Manage Salaried Employees With Playroll
When you use a global employment platform like Playroll, you gain access to tools that make managing salaried employees easier by automating payroll and ensuring compliance with labor standards. Speak to one of our experts to find out how you can seamlessly hire, manage, and pay your team regardless of your chosen pay structure.
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