Salary Pay

As a business owner or human resources manager, you may come across the term 'salary pay' in the context of employee compensation. Salary pay refers to a fixed amount of compensation that an employee receives on a regular basis, such as weekly or monthly, regardless of the number of hours worked. This differs from hourly pay, where employees are compensated based on the actual hours they work. Understanding salary pay is important for determining appropriate compensation structures, managing payroll, and ensuring compliance with labor laws.

For example, consider a marketing manager who earns an annual salary of $60,000, distributed as $5,000 per month. Whether this manager works 35 hours one week or 45 hours the next, their paycheck remains consistent. This stability can aid in budgeting for both the employee and the employer. However, it's essential to ensure that the role meets specific criteria under labor laws to be classified as exempt from overtime pay requirements. Misclassification can lead to legal complications and financial penalties.

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.

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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.

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What Is The Difference Between Salary Pay vs Hourly Pay? 

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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: 

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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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