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In simple terms, a salary disbursement is the amount of money a salaried employee receives each payday. However, unlike the wages paid hourly workers, a salary isn’t based on the amount of time worked. The amount of a salary disbursement is calculated differently, and the regulations governing compensation by salary differ somewhat from those that apply to hourly workers.
A salary is a predetermined amount of pay. For instance, you might be paid a salary of $45,000 per year. A salary disbursement is the portion of that amount you receive each payday. For example, if you are paid twice a month based on an annual salary of $45,000, you get 1/24 of that amount each payday, or $1,875. You might receive other compensation in addition to a base salary, such as commissions or bonuses.
Employees in some occupations may be exempted from the overtime and minimum wage provisions of the Fair Labor Standards Act. These include outside sales, administration, professional and executive employees, plus some computer workers. Although the frequency of salary distributions can vary (weekly, bi-weekly, bi-monthly or monthly), an exempt employee must receive the equivalent of $455 per week or more. However, an exempt employee is not entitled to additional compensation for working overtime.
Employers sometimes pay non-exempt employees on a salary basis. One common reason is that this simplifies record-keeping and reduces payroll processing costs. However, non-exempt salaried employees are covered by the overtime and minimum wage provisions of the FLSA. The employer must state an expected number of hours to be worked, and show that the employee is being paid at the minimum wage or a higher rate. For example, a non-exempt salaried employee paid $600 for a 40-hour week has an equivalent hourly rate of $15 per hour.
If a non-exempt salaried employee works more than 40 hours a week, the salary disbursement must include additional compensation at 1 1/2 times the regular hourly rate for hours worked in excess of 40. Suppose a non-exempt employee is paid $600 for a 40-hour week, but works 45 hours. The employee is entitled to five hours of overtime pay at 1 1/2 times $15 per hour, which works out to $112.50. This amount must be added to the regular salary distribution. If an employee is expected to work less than 40 hours per week, no additional compensation is required under the FLSA for extra hours worked unless the total for a week exceeds 40 hours. In that event, the employee’s salary distribution must include additional compensation at the employee’s regular hourly rate for the first 40 hours worked plus overtime pay at 1 1/2 times the regular hourly rate.