You may pay most exec­u­tive, admin­is­tra­tive, and pro­fes­sional employ­ees a salary. You may also pay highly paid employ­ees, out­side sales employ­ees, com­puter sys­tems ana­lysts and pro­gram­mers a salary. These employ­ees have high-level man­age­ment duties, auton­omy, super­vise oth­ers, make impor­tant busi­ness deci­sions, and have a fair amount of authority.

You must pay every­one else by the hour. These are employ­ees who make things and serve the cus­tomers. If these employ­ees work more than eight hours a day or more than forty hours per week, you must pay them over­time wages.

If you pay some­one a salary when you should have paid them by the hour, you may be sub­ject to an over­time claim. You might have to pay liq­ui­dated dam­ages (dou­ble unpaid over­time), unless you acted in good faith and rea­son­ably believed there was no wage vio­la­tion. You can limit your risk by get­ting DOL approval of your clas­si­fi­ca­tion or an opin­ion from legal counsel.

You must pay all nonex­empt employ­ees at least a min­i­mum wage. You’re required to post cer­tain notices regard­ing pay. You must pay equal pay and ben­e­fits to men and women who do the same or equiv­a­lent work. There are laws for tips and com­mis­sion. You don’t have to pay for com­mut­ing time, meal and rest breaks (if employ­ees are relieved from all duties), or on-call time con­trolled by the employee for their own enjoy­ment or benefit.

Make sure you fol­low pay­roll tax rules for with­hold­ing taxes, cost of meals, hous­ing, trans­porta­tion, loans, child sup­port, alimony, insur­ance pre­mi­ums, debts and wage gar­nish­ments, etc.