Understanding salaried employees: Definition and differences

When most people think of full-time work, salaried employees come to mind. But the standards and rules surrounding their work can get blurry. Do salaried employees get overtime? How many hours do you have to work to be considered full-time? And how much time off are employees entitled to?

Here’s a guide to what a salaried employee is to ensure fair compensation and effective workforce management. 

What is a salaried employee?  

Salaried employees are typically full-time staff with fixed paychecks. They get consistent work and pay, which offers stability for long-term employment. 

In the U.S., salaried employees fall into two categories: exempt and non-exempt. These categories define what employees are entitled to. 

Exempt employees are typically managers or higher-ups that don’t receive overtime pay. Non-exempt employees do get overtime pay for any hours worked beyond the standard 40-hour workweek, according to the Fair Labor Standards Act (FLSA).

How does salary pay work?

Salaried employees receive a consistent paycheck that gives them the same amount every pay period. This paycheck assumes that the employee worked a standard number of hours per week—typically 40 hours—regardless of how much they actually worked.

Here’s an example. Imagine you’re a full-time, exempt project manager earning $90,000 per year. During busy weeks, you might work 45 hours, and other weeks, you only have enough work for 35 hours’ worth. If you’d been charging a per-hour rate, your pay would fluctuate, but because you’re salaried, you earn the same amount each time.

‍Differences between salaried vs. hourly employees

Salaried and hourly employees are paid differently, but there are some more factors that set them apart from each other: 

Overtime pay

Salary pay works by giving employees the same amount every time. Hourly employers are typically entitled to overtime pay, which can boost their income if they work more than 40 hours in a week. 

Keep in mind that some employees might prefer getting overtime, like if they want extra money once in a while. But others prefer getting the same amount every paycheck, even if they do extra work. 

Work-life balance

Full-time salaried employees typically have a more predictable schedule (like 9–5). But in some cases, they might have to stay late or even do extra work from home without additional pay. 

Because they clock in and out, hourly workers have clearer boundaries, which some people might prefer. Their schedules also might change week by week. This can be a pro or a con depending on what people need from their own schedules. For example, if an hourly worker is also in school, they could purposely work more hours during school breaks. 

Job security and benefits

Labor laws for salaried employees stipulate that they need specific benefits, depending on their location. Health insurance, retirement plans, and paid vacation time are all examples of common perks.

Benefits get a little murkier for hourly and part-time positions. In most places, the law doesn’t require employers to offer the same benefits as salaried workers, so it depends on the company’s internal standards.

Income stability

For salaried employees, consistency is key. They get the same paycheck every time, which provides peace of mind and financial stability. Paychecks for hourly workers typically fluctuate more, depending on how many hours they work. They can earn more in busy periods, but slower seasons can make it harder for them to plan ahead.

Career advancement

Since salaried positions are more permanent, they often come with more career development opportunities. They might have the chance to get promoted or participate in upskilling sessions for professional growth.

Hourly positions often don’t have the same chances for advancement, though it depends on the industry and employer. Some employers still offer development opportunities, but they’re less of a sure thing.

Flexibility

Flexibility is subjective. Some people prefer set hours, and others love working different shifts every week. Hourly jobs are generally more flexible, which might work well for people who want to go with the flow. Salaried schedules are stable but feel limiting for some.

Work intensity and expectations

Salaried jobs often have higher expectations and more intense responsibilities. For example, a manager might be responsible for improving profits, and the pressure might lead them to completing additional tasks. 

Hourly employees might not have these expectations, which can be freeing. Once the clock stops, they don’t have to bring work home with them. This means less stress and better boundaries. 

Labor laws for salaried employees

Whether you’re hiring freelance, hourly, or salaried employees, you need to follow applicable labor laws. According to the U.S. Department of Labor, there are over 180 federal laws that apply to workplace activities. Here are some of the most important ones to know: 

• Exempt and non-exempt pay: Under the Fair Labor Standards Act (FLSA), exempt employees are not entitled to overtime pay, while non-exempt employees must be compensated for overtime work. Recent updates have extended overtime protections.
• Exceeding work hours: Exempt salaried employees may be required to work beyond the typical 40-hour workweek without additional compensation. Employers should clearly communicate these expectations to avoid any misunderstandings.
• Pay deductions: Employers can deduct pay for personal absences, sick leave, and disciplinary actions under certain conditions. However, these deductions must comply with specific regulations to avoid legal issues.
• Minimum wage and child labor: Under the FLSA, employers must pay non-exempt employees at least the federal minimum wage. In addition, many states set higher minimum wages. Strict rules also govern what hours and conditions minors can work, ensuring their safety and fair treatment.
• Workplace safety and health: The Occupational Safety and Health Act (OSHA) requires employers to provide a workplace free from recognized hazards. Compliance with OSHA regulations is mandatory to ensure the safety and health of all employees, including salaried workers.
• Family and medical leave: The Family and Medical Leave Act (FMLA) allows eligible employees to take an unpaid, job-protected leave of absence for up to 12 weeks for particular family and medical reasons. This law applies to all employees, whether they are salaried or hourly.
• Workers’ compensation: Salaried employees are entitled to workers’ compensation benefits if injured on the job. These benefits include medical care and compensation for lost wages due to work-related injuries.

Hire confidently and manage compliantly with Oyster

Don’t limit your hiring process to the people in your area. While it might seem impossible to hire salaried employees in different states or even countries, Oyster makes it happen. 

Oyster simplifies global employment, payroll, and benefits so you can hire top talent from anywhere in the world. Oyster’s employer of record (EOR) services allow you to give employees the salaries and perks they deserve while adhering to local laws and regulations.