U.S. · Employment · FLSA overtime
Highly compensated employee.
A shorter test replaces the full duties analysis for well-paid office workers. Enter pay and see whether each element is met.
An employee paid at least $107,432 a year, including $684 a week on salary, can be exempt from overtime by performing just one exempt duty. Under 29 CFR 541.601 the employee must have primary duty office or non-manual work, total annual compensation of at least $107,432, and customarily and regularly perform at least one duty of an executive, administrative or professional employee. Salary, commissions and nondiscretionary bonuses count; benefits do not.
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The test in plain terms
The overtime exemptions for executives, administrators and professionals normally require a detailed look at job duties. Section 541.601 offers a shortcut for the best-paid office workers. The reasoning is in paragraph (c): a high level of compensation is a strong indicator of exempt status, so the detailed analysis is unnecessary. If the employee earns enough and customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee, the exemption applies.
The figures printed in the current text of the regulation are $107,432 of total annual compensation and $684 per week on a salary or fee basis. The text we read, current through October 29, 2026, was last amended at 91 FR 27836 (May 15, 2026), and its history lists earlier amendments including 89 FR 32972 (April 26, 2024). We report the numbers as printed. If your employer or advisor quotes a different figure, check the section yourself in the eCFR before relying on either number.
What counts toward the $107,432
Total annual compensation must include at least $684 per week paid on a salary or fee basis (541.601(b)(1)). Beyond that base it may also include commissions, nondiscretionary bonuses and other nondiscretionary compensation earned during the 52-week period. It does not include board, lodging and other facilities, payments for medical or life insurance, contributions to retirement plans or other fringe benefits. A discretionary bonus, one where the employer decides whether and how much to pay, is not nondiscretionary compensation.
One quirk: the usual rule in 541.602(a)(3), which lets nondiscretionary bonuses and commissions satisfy up to 10 percent of the standard salary level, does not apply to highly compensated employees. For them, the $684 weekly floor must be paid as salary or fee.
The year-end catch-up payment
Commissions are uncertain, so the regulation lets the employer make one final payment. If total annual compensation falls short by the last pay period of the 52-week period, the employer may pay the difference during that last pay period or within one month after the period ends (541.601(b)(2)). The regulation’s example: an employee earns $90,000 base salary and the employer expected $17,432 of commissions, but only $12,000 is earned. Within one month after year end the employer may pay at least $5,432, which brings the total to $107,432. A payment made after the period counts only toward the prior period. If the employer fails to pay, the employee is not a highly compensated employee, but may still be exempt under the regular executive, administrative or professional tests.
Partial years and the 52-week period
An employee who is hired or leaves mid-year can still qualify if they receive a pro rata share of the full amount based on weeks employed, and the employer may make one final payment within one month after employment ends (541.601(b)(3)). For 26 weeks the figure is $107,432 × 26/52 = $53,716. The employer may choose any 52-week period, such as a calendar year, fiscal year or hire-anniversary year. If no other period is announced in advance, the calendar year applies (541.601(b)(4)).
Who it cannot apply to
The test covers only employees whose primary duty includes performing office or non-manual work (541.601(d)). The regulation names carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers, laborers and non-management production-line workers: they are not exempt under this section no matter how highly paid. State overtime rules may differ and are not covered here.
Worked example
A sales operations analyst earns $95,000 base salary, paid weekly, and $18,000 of commissions earned under a written plan, for $113,000 in a full 52-week year. The base salary is far above $684 per week, total pay exceeds $107,432, the work is office work, and she regularly performs an exempt administrative duty. All elements are met. If the commissions had been $8,000, total pay would be $103,000, $4,432 short; a final payment of at least $4,432 within one month after the period ends would close the gap.
Sources
Sources opened and read November 2, 2026.
Frequently asked questions
What is the highly compensated employee exemption?
A shortened FLSA overtime exemption in 29 CFR 541.601. An employee with total annual compensation of at least $107,432 who customarily and regularly performs any one exempt duty of an executive, administrative or professional employee is exempt, without a full duties analysis.
What salary must a highly compensated employee be paid?
At least $684 per week on a salary or fee basis, as part of the total annual compensation. The remainder up to $107,432 can come from commissions, nondiscretionary bonuses and other nondiscretionary pay.
Do benefits count toward the $107,432?
No. Board, lodging and other facilities, medical or life insurance payments, retirement plan contributions and other fringe benefits are excluded from total annual compensation (541.601(b)(1)).
Can an employer make up a shortfall at year end?
Yes. The employer can make one final payment in the last pay period of the 52-week period or within one month after it ends. A payment made after the period counts only toward the prior period (541.601(b)(2)).
How is the threshold prorated for a partial year?
A new hire or departing employee can qualify if they receive a pro rata portion of $107,432 based on the weeks employed, and the employer may make one final payment within one month after employment ends (541.601(b)(3)).
Can a highly paid tradesperson be exempt under this rule?
No. The rule applies only to employees whose primary duty includes office or non-manual work. Carpenters, electricians, mechanics, plumbers, laborers and similar manual workers are not exempt under it however high their pay (541.601(d)).
Does this replace the executive, administrative and professional tests?
No, it is an alternative. An employee who fails the highly compensated test, for example because of a pay shortfall, may still qualify under the regular tests in subparts B, C or D of Part 541.
Not legal or compliance advice
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