I have only been a salaried employee once for a brief period. I really don't understand how salary works or what it means to be salaried exempt vs salaried nonexempt. Every place that I have worked where there are salaried people has expected them to make up hours if they work less than 40 a week, and fill out time sheets. This is very confusing to me because I see comments all over the Net that say things such as,"I'm salaried and left work 3 hours early with out having to use any PTO time." Why didn't this person have to use PTO time? I was offered a salaried position and I really need to understand how it works before I respond. Does it mean I don't have to work 40 hours a week and I will still be paid for 40? I don't want to be taken advantage of.

Salary and hourly are pay types. When most people say "salary" they really mean exempt, as most salaried employees are exempt, but they don't have to be.

The Fair Labor Standards Act (FLSA) is the federal law that initially set minimum wage, overtime regulations etc. Someone that is exempt doesn't earn overtime, premiums or penalties that are normally associated with wage and hour work. There are different categories of exemptions such as executive (a president) or professional (a doctor). They generally require you spend at least 50% of time doing non-manual work and some of the categories have wage requirements, like double the minimum wage. States have their own rules as well. Someone that is non-exempt (or not exempt from the FLSA) needs to be paid overtime.

Hourly and salary are the basis for pay. An hourly person records the time they worked and is paid by the hour, and must be paid time and a half as required by state and federal law. A salaried person may record their time for attendance purposes, but their pay generally doesn't fluctuate based on hours worked. Generally hourly employees will be non-exempt and salaried employees will be exempt, but there are no requirements to do so. You could have a cashier that is non-exempt but salaried. But just because you pay someone on a salary doesn't make them exempt. They have to meet certain criteria of the FLSA (or state equivalent) to be considered exempt, so you would still owe overtime to that salaried cashier.

Docking pay from a salaried employee is a more complicated issue. Each state has their own rules and they change from time to time. In California you can pro-rate a salaried employees earnings on their first and last week or if they did not work for a whole day, or in block of 2 hours if PTO is available. My favorite example is if your salaried exempt person checks their voice mail on a work day, they need to be paid for that day. California also permits you to deduct from pay if the company has a PTO accrual and the salaried/exempt employee is not yet eligible to use it (introductory period) or has exhausted all of it. It really depends on your state. If this is a big concern for you, I would suggest checking with your state's department of labor to see how they enforce these rules at present.

The philosophy has changed over time and by state, but the idea initially was that it would be too expensive to pay your general manager overtime, so the law permits employers to exempt people from OT. With that exemption comes a status, because to be exempt you're in a certain kind of job. The idea is that hourly people are paid based on how long they work, and salaried people are paid based on what they know and can contribute to the organization (regardless of how long it takes them to do it.)