[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR541.118]

[Page 194-196]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 541_DEFINING AND DELIMITING THE TERMS ``ANY EMPLOYEE EMPLOYED IN A 
 
                        Subpart B_Interpretations
 
Sec. 541.118  Salary basis.

    (a) An employee will be considered to be paid ``on a salary basis'' 
within the meaning of the regulations if under his employment agreement 
he regularly receives each pay period on a weekly, or less frequent 
basis, a predetermined amount constituting all or part of his 
compensation, which amount is not subject to reduction because of 
variations in the quality or quantity of the work performed. Subject to 
the exceptions provided below, the employee must receive his full salary 
for any week in which he performs any work without regard to the number 
of days or hours worked. This policy is also

[[Page 195]]

subject to the general rule that an employee need not be paid for any 
workweek in which he performs no work.
    (1) An employee will not be considered to be ``on a salary basis'' 
if deductions from his predetermined compensation are made for absences 
occasioned by the employer or by the operating requirements of the 
business. Accordingly, if the employee is ready, willing, and able to 
work, deductions may not be made for time when work is not available.
    (2) Deductions may be made, however, when the employee absents 
himself from work for a day or more for personal reasons, other than 
sickness or accident. Thus, if an employee is absent for a day or longer 
to handle personal affairs, his salaried status will not be affected if 
deductions are made from his salary for such absences.
    (3) Deductions may also be made for absences of a day or more 
occasioned by sickness or disability (including industrial accidents) if 
the deduction is made in accordance with a bona fide plan, policy or 
practice of providing compensation for loss of salary occasioned by both 
sickness and disability. Thus, if the employer's particular plan, policy 
or practice provides compensation for such absences, deductions for 
absences of a day or longer because of sickness or disability may be 
made before an employee has qualified under such plan, policy or 
practice, and after he has exhausted his leave allowance thereunder. It 
is not required that the employee be paid any portion of his salary for 
such days or days for which he receives compensation for leave under 
such plan, policy or practice. Similarly, if the employer operates under 
a State sickness and disability insurance law, or a private sickness and 
disability insurance plan, deductions may be made for absences of a 
working day or longer if benefits are provided in accordance with the 
particular law or plan. In the case of an industrial accident, the 
``salary basis'' requirement will be met if the employee is compensated 
for loss of salary in accordance with the applicable compensation law or 
the plan adopted by the employer, provided the employer also has some 
plan, policy or practice of providing compensation for sickness and 
disability other than that relating to industrial accidents.
    (4) Deductions may not be made for absences of an employee caused by 
jury duty, attendance as a witness, or temporary military leave. The 
employer may, however, offset any amounts received by an employee as 
jury or witness fees or military pay for a particular week against the 
salary due for that particular week without loss of the exemption.
    (5) Penalties imposed in good faith for infractions of safety rules 
of major significance will not affect the employee's salaried status. 
Safety rules of major significance include only those relating to the 
prevention of serious danger to the plant, or other employees, such as 
rules prohibiting smoking in explosive plants, oil refineries, and coal 
mines.
    (6) The effect of making a deduction which is not permitted under 
these interpretations will depend upon the facts in the particular case. 
Where deductions are generally made when there is no work available, it 
indicates that there was no intention to pay the employee on a salary 
basis. In such a case the exemption would not be applicable to him 
during the entire period when such deductions were being made. On the 
other hand, where a deduction not permitted by these interpretations is 
inadvertent, or is made for reasons other than lack of work, the 
exemption will not be considered to have been lost if the employer 
reimburses the employee for such deductions and promises to comply in 
the future.
    (b) Minimum guarantee plus extras. It should be noted that the 
salary may consist of a predetermined amount constituting all or part of 
the employee's compensation. In other words, additional compensation 
besides the salary is not inconsistent with the salary basis of payment. 
The requirement will be met, for example, by a branch manager who 
receives a salary of $155 or more a week and in addition, a commission 
of 1 percent of the branch sales. The requirement will also be met by a 
branch manager who receives a percentage of the sales or profits of the 
branch, if the employment arrangement also includes a guarantee of at 
least the minimum weekly salary (or

[[Page 196]]

the equivalent for a monthly or other period) required by the 
regulations. Another type of situation in which the requirement will be 
met is that of an employee paid on a daily or shift basis, if the 
employment arrangement includes a provision that the employee will 
receive not less than the amount specified in the regulations in any 
week in which the employee performs any work. Such arrangements are 
subject to the exceptions in paragraph (a) of this section. The test of 
payment on a salary basis will not be met, however, if the salary is 
divided into two parts for the purpose of circumventing the requirement 
of payment ``on a salary basis''. For example, a salary of $200 in each 
week in which any work is performed, and an additional $50 which is made 
subject to deductions which, are not permitted under paragraph (a) of 
this section.
    (c) Initial and terminal weeks. Failure to pay the full salary in 
the initial or terminal week of employment is not considered 
inconsistent with the salary basis of payment. In such weeks the payment 
of a proportionate part of the employee's salary for the time actually 
worked will meet the requirement. However, this should not be construed 
to mean that an employee is on a salary basis within the meaning of the 
regulations if he is employed occasionally for a few days and is paid a 
proportionate part of the weekly salary when so employed. Moreover, even 
payment of the full weekly salary under such circumstances would not 
meet the requirement, since casual or occasional employment for a few 
days at a time is inconsistent with employment on a salary basis within 
the meaning of the regulations.

[38 FR 11390, May 7, 1973, as amended at 40 FR 7092, Feb. 19, 1975]

    Effective Date Note: Paragraph (b) in Sec. 541.118 was revised at 
46 FR 3014, Jan. 13, 1981. In accordance with the President's Memorandum 
of January 29, 1981 (46 FR 11227, Feb. 6, 1981), the effective date was 
postponed indefinitely at 46 FR 11972, Feb. 12, 1981.
    The text of paragraph (b) set forth above remains in effect pending 
further action by the issuing agency. The text of the postponed 
regulation appears below.

Sec. 541.118  Salary basis.

                                * * * * *

    (b) Minimum guarantee plus extras. It should be noted that the 
salary may consist of a predetermined amount constituting all or part of 
the employee's compensation. In other words, additional compensation 
besides the salary is not inconsistent with the salary basis of payment. 
The requirement will be met, for example, by a branch manager who 
receives a salary of $250 or more a week and in addition, a commission 
of 1 percent of the branch sales. The requirement will also be met by a 
branch manager who receives a percentage of the sales or profits of the 
branch, if the employment arrangement also includes a guarantee of at 
least the minimum weekly salary (or the equivalent for a monthly or 
other period) required by the regulations. Another type of situation in 
which the requirement will be met is that of an employee paid on a daily 
or shift basis, if the employment arrangement includes a provision that 
the employee will receive not less than the amount specified in the 
regulations in any week in which the employee performs any work. Such 
arrangements are subject to the exceptions in paragraph (a) of this 
section. The test of payment on a salary basis will not be met, however, 
if the salary is divided into two parts for the purpose of circumventing 
the requirement of payment ``on a salary basis''. For example, a salary 
of $300 in each week in which any work is performed, and an additional 
$55 which is made subject to deductions which are not permitted under 
paragraph (a) of this section.

                                * * * * *