The exemption tested in this chapter turns first on a number set out at § 541.600: to qualify as an exempt executive, administrative, or professional employee, you must pay the employee at a rate of not less than $684 per week, paid exclusive of board, lodging, or other facilities under § 541.606, so employer-furnished non-cash items such as meals or housing never count toward that floor. Executive employees must be paid on a salary basis — a predetermined amount paid each pay period that is not reduced because of variations in the quality or quantity of work performed. Administrative and professional employees may instead be paid on a fee basis (§ 541.600(a); see § 541.605 for the fee-basis definition) — an agreed sum paid for a single job regardless of the time its completion takes. That figure is a floor, not a target — pay a salary below it and the exemption is off the table no matter how the employee’s duties read. It is also a federal floor only: § 541.4 states that the Act’s standards “may be exceeded, but cannot be waived or reduced,” so an employer must still comply with any stricter state or municipal minimum wage or maximum workweek standard. A related allowance under § 541.602(a)(3) is easy to miss: an employer may satisfy up to 10 percent of that $684 weekly amount with nondiscretionary bonuses, incentives, and commissions (each promised or determined by a set formula, not awarded at the employer’s discretion), so long as they are paid annually or more frequently over the 52-week period; if the total falls short by year’s end, one final catch-up payment, made no later than the next pay period after the 52-week period ends, can still bring the year into compliance. This 10 percent allowance is separate from the highly compensated employee compensation mix described next — § 541.602(a)(3) does not apply to highly compensated employees under § 541.601, who follow their own rule. Two adjustments apply outside the U.S. mainland, and only for employers other than the Federal government: employers in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands may use $455 per week, and employers in American Samoa may use $380 per week — both likewise paid exclusive of board, lodging, or other facilities. Computer employees have their own alternative — an hourly rate of at least $27.63 satisfies the requirement in place of a weekly salary.

§ 541.601 sets a second, higher threshold for highly compensated employees: an employee with total annual compensation of at least $107,432 is deemed exempt if that employee customarily and regularly performs even one of the exempt duties of an executive, administrative, or professional employee — a considerably lighter duties test than the standard exemption carries. At least $684 of every week’s pay toward that total must still be paid on a salary or fee basis — a fee basis is an agreed sum paid for a single job regardless of the time its completion takes, unlike a salary basis’s predetermined amount per pay period; the rest can come from commissions, nondiscretionary bonuses, and similar nondiscretionary pay earned over the 52-week period, but not from board, lodging, or other facilities as defined in § 541.606 (such as meals furnished by the employer, merchandise furnished at company stores, housing furnished for dwelling purposes, or commuting transportation), or from insurance, retirement contributions, or other fringe benefits. If an employee falls short by year’s end, the employer has a narrow fix: one final catch-up payment, made during the last pay period of the 52-week period or within one month after it ends, can still make the year qualify.

Meeting the dollar figure is necessary but not sufficient — how the salary is actually paid matters just as much. Under § 541.603, an employer with an actual practice (a pattern of deductions, not a single isolated incident) of making improper deductions — deductions that reduce pay based on the amount or timing of work performed, such as docking pay for a partial-day personal absence — from an exempt employee’s salary loses the exemption, and it is lost for every employee in the same job classification working under the same manager responsible for the deductions, for as long as the practice continued. It does not matter how far above $684 the salary sits — improper deductions expose the exemption on the same terms as anyone near the floor. The consequence is narrower for a genuine one-off: isolated or inadvertent improper deductions do not cost the exemption if the employer reimburses the employee, and a written safe-harbor policy — one that prohibits improper deductions, includes a complaint mechanism, reimburses employees for any improper deductions already made, and commits in good faith to complying going forward — protects the employer further. That protection is not unconditional: under § 541.603(d), the employer keeps it only unless the employer willfully violates its own policy by continuing to make improper deductions after receiving employee complaints. None of this restricts paying more: under § 541.604, a guaranteed weekly salary can carry bonuses, commissions, or extras such as a flat sum, bonus payment, straight-time hourly amount, or time-and-one-half payment on top without disturbing salary basis. The risk runs only in the direction of taking pay away.