Salary Basis Test
Under the Fair Labor Standards Act (FLSA), a criterion used to determine whether an employee is entitled to an exemption from overtime pay is the salary basis test. The test looks more at how an employee is paid than what they do on the job. An employee must receive a predetermined salary amount on a regular basis, regardless of the number of hours worked, in order to pass the salary basis test.
An employee must receive a fixed salary that is unaffected by the quantity or quality of their work in order to pass the salary basis test. This means that an employee’s pay should remain the same regardless of whether they work fewer or more hours than usual during a given workweek. However, certain limited deductions may be made, such as illness, jury duty, or personal absences.
The salary basis test plays a role in determining whether an employee is exempt from overtime pay requirements or not. While non-exempt employees are eligible for overtime pay, employees who work more than 40 hours per week are not eligible for overtime pay. One of the requirements for an employee to be exempt is to pass the salary basis test.
To correctly classify their employees and accurately calculate their wages, employers must ensure that they adhere to the salary basis test. A violation of the salary basis test could result in legal action and the obligation to pay back wages for overtime that was not paid. To ensure compliance with the salary basis test and other applicable wage and hour regulations, employers should therefore carefully review the FLSA guidelines and consult with legal professionals.