Enter to open, tab to navigate, enter to select
Salary Basis
Practical Law Glossary Item w-003-2582 (Approx. 3 pages)
Glossary
Salary Basis
Under the Fair Labor Standards Act (FLSA), one of the requirements for exempting certain executive, administrative, and professional employees from the minimum wage and overtime pay requirements.
The executive, administrative, and professional (EAP) exemptions generally require that an employee's job duties and compensation satisfy both:
- The salary basis test.
- The duties test.
For more information on the duties test, see FLSA White Collar Exemptions Checklist: Duties Test.
The salary basis test requires that an exempt employee be paid:
- A salary at a rate at least equal to the standard salary level of $684 a week. Special salary levels apply to US territories. Some practitioners treat this minimum threshold as a separate "salary level" test. (29 C.F.R. § 541.600.)
- On a salary basis, meaning that:
- the employee is paid on a weekly or less frequent basis (for example, monthly);
- the employee receives, during each pay period, a predetermined amount comprising all or part of their compensation;
- the amount is not subject to reduction because of variations in the quality or quantity of the work performed; and
- the employer does not take impermissible deductions from the employee's salary. Permissible deductions are identified in the FLSA regulations (29 C.F.R. § 541.602(b)).
(29 C.F.R. §§ 541.600 and 541.602.)
On April 23, 2024, the DOL announced a final rule to increase the standard salary level for the EAP exemptions and the total annual compensation threshold for the HCE exemption. Two incremental increases are scheduled to take effect July 1, 2024 and January 1, 2025, with subsequent updates at three-year intervals. For more on the DOL's final rule, including prior rulemaking and legal challenges to the final rule, see Minimum Salary for the Executive, Administrative, and Professional Exemptions Under the FLSA: DOL Rulemaking Tracker.
For more information on permissible and improper deductions, including a safe harbor for improper deductions, see Practice Note, Wage and Hour Law: Overview: Duties Test and Salary Basis Test and Standard Clause, FLSA Salary Basis Safe Harbor Provision.