Have you ever heard the phrase salaried employee, but didn’t know what it meant? Many employees earn hourly wages, so the concept of salary pay is foreign.
According to the Fair Labor Standards Act, all workers who earn under $23,600 must be paid by the hour. Although there are hourly employees who make more than that, the annual rate of pay isn’t the only factor for determining who gets paid a salary.
If you’re wondering, “How do salaries work?”, we’ll explain more below. Just keep reading.
What Is a Salary?
A salary is a monetary payment issued from an employer to an employee. Unlike hourly wages, salaries are a set amount of financial compensation paid to an employee in exchange for the work they perform on a job.
No matter how much time the employee spends performing their duties, their paycheck amount stays the same. Salaries are generally paid on a weekly, bi-weekly, or monthly basis depending on the organization that is distributing their salary.
When an employer explains the salary amount to an individual, they may describe how much that person will make per pay period, or the amount the employee will make per calendar year.
The Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) is a federal law that provides mandated definitions for various types of compensation. The FLSA standards help to determine overtime pay, minimum wage laws, rules regarding tipped employees, payroll employer record-keeping, etc.
The Fair Labor Standards Act upholds these standards no matter if the employee works full- or part-time.
How Do Salaries Work?
The employer determines how often the worker is paid. For instance, if a salaried employee makes $60,000 per year, they will receive regularly scheduled payments throughout the course of the year.
However, an employee on salary must be classified as either exempt or non-exempt according to the FLSA. Here’s the difference between the two:
Exempt Salary
An exempt salaried employee is excluded from minimum wage, overtime stipulations, and other protections that are specifically provided to non-exempt workers. Usually, the exemption is only given to employees in supervisory, executive, professional, or outside sales positions.
In these instances, the employer must pay a salary instead of an hourly wage. Per the FLSA regulations, exempt status belongs to employees who:
- Regularly supervise two or more other workers
- Perform duties that include hiring, firing, promotion, or scheduling
- The primary objective of their job is management
Many supervisors also approve time so the hourly employees can get compensated for the pay period. This job duty may require the use of a check stub maker.
Exempt vs Non-Exempt Salary: Why the Difference Matters
Understanding whether a salaried position is exempt or non-exempt is critical. Exempt employees are typically paid for their role, not their hours, which means overtime pay is not required even if they work more than 40 hours per week.
Non-exempt salaried employees, on the other hand, are still entitled to overtime pay under federal law. This distinction affects your earnings, work-life balance, and legal rights. Many workers assume salary automatically means exempt, but that is not always true.
Knowing your classification helps you understand what you are legally entitled to and prevents misunderstandings with your employer.
Non-Exempt Salary
Non-exempt workers are subject to FLSA payment requirements. Employees who are non-exempt must be paid the federal minimum wage for each hour and be given overtime of at least 1.5 times their hourly rate for any hours worked over 40 per week.
Essentially, exempt employees are expected to work as many hours as needed to complete their duties. Whereas, non-exempt employees are required to be paid overtime if they work more than 40 hours a workweek.
How Does Salary Pay Work in Real Life?
In practice, salary pay means receiving a fixed amount of income spread across the year, regardless of how many hours you work in a given week. Employers divide your annual salary into equal pay periods, such as weekly, bi-weekly, or monthly payments.
For example, if you earn $60,000 per year and are paid bi-weekly, you will receive roughly the same paycheck every two weeks. This predictability is one of the main reasons people choose salaried roles, as it allows for easier budgeting and financial planning.
However, salary pay does not always mean unlimited flexibility. Expectations around availability, workload, and performance are usually higher, especially for exempt employees.
The Benefits of Working on Salary
There are several perks to working on a salary. For some people, it’s the way to get paid, while others prefer making an hourly income. Individuals who choose to take a management position within a company don’t always have the option to select hourly compensation.
The compensation structures mainly depend on the type of approach used to calculate the salary. Whether it’s a traditional, broad band, pure market-based or step scales salary structure, each approach will work in a particular setting. For example, a traditional approach might be successful when calculating the managerial position salaries, while a pure market-based is useful when assessing the validity of the market value.
Depending on the nature of the business, the individual has to decide if being exempt or non-exempt is best for them. Here are the benefits of earning a salary:
Financial Security
Unlike hourly workers, salaried employees have a bit more financial security. An hourly employee can have their hours cut at any time, resulting in a financial deficit. However, even if business is slow, most salaried workers can maintain their finances.
Preplanning Finances
Another great advantage of earning a salary is knowing how much you will get each pay period. Receiving set compensation removes the guesswork out of how much your paycheck will be. Depending on the hours worked, an hourly employee’s check can vary.
Furthermore, predicting future payment isn’t possible. For instance, you might expect to work 40 hours for the workweek, but if you have to miss time from work, you might not get paid for those hours. Salaried employees don’t have to worry about that.
Higher Wages
Salaried employees usually make more than hourly workers because they are expected to do more. Again, most employees who receive a salary are in a supervisory or management position.
They are required to finish their work within a certain timeframe, which often takes more time than 40 hours per week. Also, individuals in salary positions have more responsibility in their job role.
Flexibility
Since salary workers don’t have to worry about working a specific number of hours, they may be able to create a more suitable schedule. Some employers primarily focus on the quality of work and the timeframe that it’s finished.
Therefore, if a salaried employee does their duties efficiently, it could mean more flexibility for them. An adjustable work schedule allows more time for family, hobbies, and other endeavors.
How Does Salary Pay Work? 10 Things Your Boss Won’t Tell You
1. Your Salary Isn’t Just About the Number You Signed For
Many companies structure salary offers strategically. You may receive less cash because the employer is factoring in health benefits, PTO, or insurance costs—often without explaining it clearly.
2. Your Effective Hourly Rate May Be Lower Than You Think
A salaried role often requires extra hours. If you divide your weekly workload into your salary, the hourly value can drop significantly—sometimes below well-paid hourly roles.
3. Salary Does Not Always Mean Exempt
Some employees on salary are still legally non-exempt and entitled to overtime. Employers rarely highlight this distinction unless asked directly.
4. Salaries Can Be Docked Legally in More Situations Than You Realize
Although salary is “fixed,” employers may legally reduce pay for:
- Full unpaid days off
- Disciplinary reasons
- Violations of workplace policies
- Certain types of FMLA leave
Most salaried employees don’t know their rights until after it happens.
5. Raises Are Not Automatic—Even for High Performers
Annual raises, step increases, or cost-of-living adjustments are optional, not guaranteed. Many companies quietly freeze pay but increase workloads.
6. Benefits Matter More Than Base Pay
Your medical plan, retirement match, commuter benefits, and bonuses often add 20%–40% additional value. Employers emphasize base salary—because it sounds bigger—but the real value is often hidden in fine print.
7. You Can Negotiate More Than Salary
Professionals often forget they can negotiate:
- Remote/hybrid days
- Signing bonus
- Vacation days
- Professional development budget
- Annual bonus structure
Managers rarely mention this because it raises their cost.
8. Your Salary Range Is Set Years in Advance
Most companies pre-budget salary bands long before hiring. This means your manager often cannot exceed the range—no matter how good you are.
9. Promotions Don’t Always Mean a Big Salary Jump
Many firms promote employees with a title change but give only a small pay bump. This is called a “soft promotion,” and it helps companies fill roles cheaply.
10. You Have More Power During Hiring Than After
Once you accept the offer, raising your salary becomes harder. The hiring stage is where:
- HR has budget flexibility
- Managers are motivated to close the role
- You can request more benefits
That’s why negotiation before signing is essential.
Can a Salaried Employee Have Their Pay Docked?
Although salaried employees continue to get paid under most circumstances, sometimes they aren’t. An employer can dock an employee’s salary for missing full days of work, disciplinary suspensions, violation of rules, unpaid FMLA leave, and more. The grounds for docking pay is usually determined by the employer.
When Salary Pay Can Be Reduced Legally
Although salary pay is generally consistent, there are situations where employers may legally reduce pay. These include full-day absences for personal reasons, unpaid leave under FMLA, disciplinary suspensions, or violations of company policy.
Partial-day deductions are typically not allowed for exempt employees. If your pay is docked incorrectly, it may indicate misclassification or non-compliance with labor laws. Understanding these rules helps you protect your income and recognize when to ask questions or seek clarification.
Do You Think a Salaried Position Is Right for You?
Hopefully, this article helps to answer your question of ” How do salaries work”? When it comes to your income, it’s imperative to know every aspect of how you’ll get paid for your work. If you’re thinking about accepting a salaried position, be sure to weigh the pros and cons.
Did you learn anything from this information? If so, feel free to browse more of our posts. Our blog is dedicated to educating our readers about money, business, and entrepreneurship.
We’re sure you’ll discover something that you didn’t know before!
FAQs
1. How does salary pay work compared to hourly pay?
Salary pay provides a fixed income paid on a regular schedule, while hourly pay depends on the number of hours worked. Salaried employees usually earn the same amount each pay period.
2. Does salary pay mean no overtime?
Not always. Some salaried employees are non-exempt and still qualify for overtime pay. It depends on job duties and legal classification under the FLSA.
3. How often are salaried employees paid?
Salaried employees are commonly paid weekly, bi-weekly, semi-monthly, or monthly, depending on company policy.
4. Can a salaried employee earn less in a slow work week?
In most cases, no. Salaried employees receive the same pay even if work slows down, unless they miss full days under qualifying conditions.
5. Is salary pay better than hourly pay?
Salary pay offers income stability and benefits, while hourly pay may offer overtime earnings. The better option depends on workload, flexibility, and personal financial goals.
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