The salary basis test sounds procedural but runs at the heart of how employers classify exempt employees. An employer can meet the duties test and the salary level test and still lose an exemption on the salary basis test if pay gets docked incorrectly. A half-day deduction for leaving early, a deduction for a snow day, a partial-week pay cut because of a slow week, each one can break the exemption. The DOL writes the rule broadly: exempt employees must receive a fixed, predetermined amount each pay period, regardless of the quality or quantity of work. The narrow list of permitted deductions is the whole universe of what's allowed. Everything else risks the exemption.
What the Salary Basis Rule Requires To satisfy the salary basis test, an employee must regularly receive a predetermined amount of compensation each pay period on a weekly or less frequent basis. The amount can't be reduced because of variations in the quality or quantity of work. Unless a specific exception applies, the employee must receive the full salary for any week in which they perform any work.
As of 2026, the salary level test requires at least $684 per week ($35,568 annually), set by the DOL. Salary basis is distinct from salary level: salary basis is about how pay is structured, salary level is about how much. Both have to be satisfied, along with the duties test.
When Are Deductions From an Exempt Salary Allowed? The FLSA permits specific deductions. Full-day absences for personal reasons (not illness), full-day absences for sickness when the employer has a bona fide plan providing wage replacement, disciplinary suspensions of a full day or more for workplace conduct rule violations, unpaid FMLA leave, the first or last week of employment, and offsets for military or jury duty pay. Docking for anything outside this list, including partial-day absences, typically breaks the salary basis.
How Improper Deductions Break the Exemption When an employer makes improper deductions, the consequences can extend beyond the individual employee. If the improper deductions reflect an "actual practice" or the employer has a policy that permits them, the exemption can be lost for all employees in the same job classification working for the same manager during the period of deductions. Back overtime can accumulate across the entire class.
The DOL provides a safe harbor for honest mistakes: if the employer has a clearly communicated policy prohibiting improper deductions, reimburses the employee for any incorrect deductions, and commits to future compliance, the exemption isn't lost. Written policies and manager training are what unlock this safe harbor.
What Counts as a "Partial-Day" Deduction? Partial-day deductions are the most common salary basis trap. An exempt employee who leaves at noon for personal reasons can use PTO for the missed afternoon, but the employer can't reduce their pay directly for the partial day. The difference: a PTO deduction doesn't change salary basis; a pay deduction does. Training managers on this distinction prevents a large share of classification issues.
The Salary Basis Test in Combination With Other FLSA Tests The salary basis test is one of three tests for exempt status. The duties test asks whether the employee's primary duty matches an exempt category. The salary level test asks whether pay meets the DOL threshold. The salary basis test asks whether pay is structured correctly. All three must be satisfied. An employee who meets the duties test and the salary level test but is subject to improper deductions loses the exemption, even though two out of three are met.
For the related mechanics of fixed versus hourly pay, see salaried employee . For how the overtime rules apply when the salary basis fails, see salaried non-exempt .
Keeping the Salary Basis Test Protected The practical work of keeping an exemption intact comes down to manager training and payroll discipline. Train managers on the narrow list of permissible deductions and the partial-day rule. Use PTO for time off rather than pay adjustments. Publish a salary basis deduction policy that states the employer's commitment to the rule and describes the reimbursement process. The DOL Fact Sheet #17G explains the salary basis requirement in full. For regulated industries or employers with prior wage-and-hour findings, a quarterly pay-deduction audit catches improper deductions before they compound into an exemption-breaking pattern.
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