An Introduction to Salaried Non-Exempt

By Kathryn O'Connor, PHR, SHRM-CP, CCP, GRP, Director, Compensation Services
Published September 10, 2024

HR Source has been helping members understand the federal Fair Labor Standards Act (FLSA) and classify jobs as exempt or non-exempt for decades. In fact, our Field Guide to Employee Classification (previously known as the FLSA Flowchart) is one of our most popular member resources.

With very limited exceptions, exempt employees must follow the salary basis of pay rule: the exempt worker receives a predetermined amount of compensation each pay period, without it being reduced based on the quality or quantity of their work.

But we often get asked the question, can non-exempt employees also be paid a salary? The answer is yes.

So how does this work?

Salaried, non-exempt employees receive a salary for a fixed number of hours. However, when they exceed the fixed number of hours, additional compensation is owed. 

To calculate overtime pay, use the equivalent hourly rate the employee earns. For example, a computer technician earning $55,000 annually makes the equivalent of $26.44 per hour, based on a 40-hour workweek. The overtime rate for salaried, non-exempt employees is the same as hourly, non-exempt employees: 1.5 times the hourly rate. Therefore, the computer technician with a 40-hour workweek would earn $39.66 for every hour that exceeds 40 hours within a week.

In a second example, let’s look at an employer who works a 37.5 hour workweek. In this situation, the computer technician earning $55,000 annually makes the equivalent of $28.21 per hour. The computer technician with a 37.5 hour week would earn $28.21 for the 2.5 hours bridging between 37.5 and 40 hours in a week, and then $42.32 for every hour after 40.

Under this arrangement, the employer and the employee must have a clear (and documented) understanding of how many hours per week the fixed salary represents.

Being in a salaried, non-exempt status can be appealing, especially for the employee. Salaried, non-exempt employees receive a guaranteed salary AND are eligible for overtime pay.

Employers should beware of some inherent downsides of this employment status. Too often, this arrangement blurs the line between exempt and non-exempt status. Because salary non-exempt pay is generally a fixed amount, many employers mistakenly believe they don’t need to track employees’ work hours each week. Employers are still required to track all hours worked, verify employees are receiving minimum wage, and ensure the proper amount of overtime is paid.

Employers should also be aware that a salary non-exempt employee’s set salary is generally not deducted for instances of late arrival, early departure, or other missed work time. This may differ from other non-exempt employees compensated on an hourly basis, who are paid only for actual time worked.

Not sure if this arrangement is right for your organization? HR Source members are encouraged to contact the HR Hotline (800-448-4584) to connect with one of our human resource professionals.

Are your non-exempt employees paid a salary (salaried non-exempt) or are they considered ‘hourly’? Share your practice with your peers in this discussion thread on HR Exchange.