That’s not the question that actually matters. The real question for small business owners is: “Does paying this person a salary let me skip paying them overtime?” And the answer to that is usually more complicated than they expect. This mix-up is one of the most common — and most expensive — mistakes small employers make. Let’s clear it up.
The Myth: “Salary = No Overtime”
A lot of business owners believe that once you put an employee on salary, overtime rules disappear. That’s not true. Salary is just a method of payment — a fixed amount per pay period, regardless of hours worked. It has nothing to do, by itself, with whether an employee is legally exempt from overtime. Whether an employee is truly exempt (not owed overtime) depends on meeting three separate tests under the Fair Labor Standards Act (FLSA). Miss any one of them, and the employee is non-exempt — meaning they’re owed time-and-a-half for every hour worked over 40 in a week, salary or not.
The Three Tests for Exemption (All must be met)
1. Salary Basis Test
The employee must receive a salary that is a fixed, predetermined amount each pay period that doesn’t fluctuate based on hours worked or quality of work.
2. Salary Level Test
As of 2026, the employee must earn at least $684 per week ($35,568 per year) under federal law. This amount has fluctuated, up and down, over the years. Florida follows the federal number, so if you’re an employer with only Florida-based employees, $684/week is your line. If you have employees working in other states, check those states’ rules separately.
3. Duties Test
This is the part employers overlook most. The employee’s actual day-to-day job duties — not their title — must primarily fall into one of the recognized exemption categories. Read DOL Fact Sheet.
Five Main Overtime Exemption Categories
Executive – Primary duty is managing the business or a department, regularly directs the work of at least two full-time employees, and has real input into hiring/firing decisions. Read more.
Administrative – Primary duty involves office or non-manual work directly related to business operations, and includes exercising independent judgment on significant matters. Read more.
Professional – Work requires advanced knowledge in a field of science or learning, typically acquired through specialized education (think accountants, licensed professionals) — or “creative professional” work requiring invention, imagination, or talent. Read more.
Computer Employee – Certain computer systems analysts, programmers, and software engineers performing specific technical duties. Read more.
Outside Sales – Employees whose primary duty is making sales away from the employer’s place of business, with no salary minimum required for this one. Read more.
Common Mistakes Small Employers Make
- Assuming a job title settles it. Calling someone a “Manager” or “Supervisor” doesn’t make them exempt. What matters is what they actually do most of the time — not what’s printed on a business card.
- Exempting someone because “everyone else in the industry does it.” Industry norms aren’t a legal defense. Each role has to be evaluated on its own facts, and each position must fit its own exemption.
- Docking pay from salaried employees for partial-day absences. Exempt employees generally must be paid their full salary for any week they perform work, with very limited exceptions. Improper deductions can jeopardize the exemption entirely — for that employee and sometimes others in the same role.
- Forgetting to re-visit classifications as duties or pay change. A promotion, a pay freeze, or a shift in responsibilities can quietly turn an exempt role into a non-exempt one. Classifications aren’t “set it and forget it.”
- Not documenting the reasoning. If you’re ever audited or challenged, “I thought they qualified” isn’t enough. Keep a short written note for each exempt role explaining which duties and pay level support the exemption (which exemption applied and why).
Bottom Line: Paying someone a salary is simple. Classifying them correctly as “exempt” is not — it takes passing all three tests, not just picking a pay structure. Misclassification is one of the costliest wage-and-hour mistakes a small business can make, often resulting in back pay, penalties, and legal fees. Consultstu talks with small business clients about DOL exemptions every week, and we can help your small business too.
