FLSA fee basis pay is a compensation method that lets an employer pay a single flat sum for a specific, one-time assignment instead of an hourly wage or a recurring salary, and it can preserve an employee’s overtime exemption if the fee, projected across a 40-hour workweek, works out to at least $684. The arrangement is available only to certain white-collar workers, and each fee has to pass the salary-level math on its own. Get the projection wrong and the exemption disappears for that assignment, along with any overtime the worker put in.
What Fee Basis Pay Is
The Department of Labor defines fee basis pay in 29 CFR § 541.605. An employee paid on a fee basis receives an agreed-upon sum for a single job, regardless of how long it takes to finish. The payment is tied to the completed result, not to the hours invested. If a graphic designer agrees to produce a logo for $1,500 and finishes in twelve hours, she earns $1,500. If it takes thirty hours instead, the fee stays the same.1eCFR. 29 CFR 541.605 – Fee Basis
Two features distinguish a genuine fee from other pay structures. The amount has to be agreed on before the work starts, and the work itself should be unique rather than one of an indefinite series of identical tasks. Payments calculated by the hour or by the day do not qualify even if they happen to add up to a fixed total.1eCFR. 29 CFR 541.605 – Fee Basis
One practical detail catches employers out: because the fee is predetermined, you generally cannot reduce it after the fact because you were unhappy with the result. The regulation cross-references the salary basis protections in 29 CFR § 541.602(a), which prohibit reducing predetermined pay based on variations in quality or quantity. If you agree to pay $2,000 for a consulting report, you owe $2,000 when the report is delivered.2U.S. Department of Labor. Fact Sheet 17G – Salary Basis Requirement and the Part 541 Exemptions Under the FLSA
Who Can Be Paid on a Fee Basis
Not every exempt worker qualifies. The regulation limits fee basis pay to two categories of white-collar exemptions: administrative employees and professional employees, including creative professionals like writers, artists, and musicians.1eCFR. 29 CFR 541.605 – Fee Basis A singer paid a flat rate to perform at a one-time event, or a consultant hired for a single organizational assessment, are the classic cases.
Computer employees qualify too. Under 29 CFR § 541.400, a computer professional can be exempt when compensated on a salary or fee basis at the standard salary level, or alternatively on an hourly basis at a rate of at least $27.63 per hour.3eCFR. 29 CFR 541.400 – General Rule for Computer Employees A software developer paid a flat fee to build a custom application could maintain exempt status through a fee arrangement.
Executive employees are the notable exclusion. The salary-level regulation at 29 CFR § 541.600(a) says administrative and professional employees may be paid on a fee basis, and says nothing about executives.4eCFR. 29 CFR 541.600 – Amount of Salary Required Managers with ongoing supervisory responsibilities need a standard recurring salary. An employer who tries to pay a department head per project rather than per pay period risks losing the exemption entirely.
The $684 Weekly Minimum
This is where employers most often work from outdated information. In 2024 the Department of Labor finalized a rule that would have raised the minimum weekly salary for white-collar exemptions to $844 on July 1, 2024, and then to $1,128 on January 1, 2025. A federal court in Texas vacated the entire rule on November 15, 2024, and the DOL reverted to the 2019 standard: $684 per week, or $35,568 annually.5U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption from Minimum Wage and Overtime Protections Under the FLSA The DOL filed an appeal in early 2025, but $684 remains the enforceable federal minimum.6U.S. Department of Labor. Frequently Asked Questions – Final Rule
You may notice that the current text of 29 CFR § 541.605 contains an example referencing a $1,128 weekly threshold. That example reflects the vacated 2024 rule and is not being enforced. The operative number is $684.
One caveat matters for anyone building fees around the federal floor: several states impose higher salary thresholds. Employers in California, Washington, and New York may need to meet a larger number to preserve the exemption under state law, regardless of what the federal rules require. Check the state threshold alongside the federal one.
The Salary-Level Projection
Fee-basis workers do not receive a predictable weekly paycheck, so the DOL uses a hypothetical projection to test the fee against the $684 minimum. Take the fee, divide by the hours the task actually took, and multiply that hourly rate by 40. If the result hits $684 or more, the exemption holds.1eCFR. 29 CFR 541.605 – Fee Basis
A straightforward example. A professional is paid $500 for an assignment that takes roughly 20 hours. Dividing $500 by 20 hours yields $25 per hour. Multiply $25 by 40 and the projected weekly earnings come to $1,000, well above $684. The exemption is safe.
Change the numbers and the answer flips. Suppose the assignment pays $300 and still takes 20 hours. The effective rate is $15 per hour, which projects to $600 over a 40-hour week. That falls below $684, so the worker is not exempt for that assignment and is owed overtime for any hours beyond 40 in the workweek.4eCFR. 29 CFR 541.600 – Amount of Salary Required
The test applies to each individual project. An employer cannot average a generous fee on one project with a low fee on another to produce a blended rate that clears the threshold. Every assignment has to pass the calculation independently, which makes accurate time tracking essential even when the worker is otherwise exempt from hourly recordkeeping.
Fee, Piecework, or Commission
The line between a valid fee and piecework comes down to repetition. A fee covers a unique assignment: an architect designing a specific building, a photographer shooting a particular event. Piecework covers an indefinite series of identical tasks paid on an identical basis, like a factory worker earning a set amount per unit assembled. If the same payment structure repeats over and over for substantially identical work, regulators are likely to call it piecework rather than a fee, and the overtime exemption disappears.1eCFR. 29 CFR 541.605 – Fee Basis
Commissions are a separate structure entirely. Commission pay is tied to sales performance and fluctuates with the employee’s results. A true commission has to be part of a bona fide plan where earnings genuinely vary with performance; a formula that produces virtually the same fixed amount every week is not a real commission. Fee basis pay has nothing to do with sales volume. The flat sum compensates the worker for finishing a defined project, not for generating revenue.
Employers sometimes try to dress up what is really piecework as a series of fees for nominally different tasks. An illustrator hired to create 200 product images at $50 each is doing piecework, not fee-based professional work, even if each image depicts a different product. The test is whether the work is genuinely unique in scope and character, not whether minor details change between assignments. Documenting the distinct scope and deliverables of each project in writing helps defend the fee classification if it is challenged.
Fee Basis Is Not Independent Contracting
Because fee-basis workers receive a flat sum per project instead of regular paychecks, some employers confuse the arrangement with independent contracting. They are different things. Fee basis pay is a compensation method for employees, meaning people who remain on the company’s payroll, receive benefits if offered, and are subject to the employer’s control over how the work is done. Independent contractors run their own businesses and are not covered by the FLSA at all.
Misclassifying an employee as an independent contractor to avoid overtime is one of the most common FLSA violations, and paying someone on a fee basis does not change their employment status. If a worker meets the DOL’s test for an employment relationship, that worker is an employee whether compensation comes as an hourly wage, a salary, or a per-project fee.
Weeks With No Project
What happens during weeks when no project is assigned? The general rule for exempt employees is that they must receive their full predetermined pay for any week in which they perform any work, but they need not be paid for weeks in which they do no work at all.7eCFR. 29 CFR Part 541 – Defining and Delimiting the Exemptions
For fee-basis workers, the exemption effectively applies project by project. During a week when the employee is actively working on a fee-based assignment, the salary-level test applies to that fee. During a week when no work is performed, no payment is required to maintain the exemption. But if the employee does any work at all during a week, even a few hours, the employer cannot dock pay below the agreed fee for that assignment without jeopardizing exempt status.
Records to Keep
Employers must keep records for fee-basis employees just as they would for other exempt workers, with one added layer. Under 29 CFR § 516.3, records must include the basis on which wages are paid in sufficient detail to permit calculation for each pay period of the employee’s total remuneration. For fee-basis workers, that means documenting the agreed fee amount, the specific task it covers, and enough detail to reconstruct the salary-level test if audited.8eCFR. 29 CFR 516.3 – Bona Fide Executive, Administrative, and Professional Employees
As a practical matter, employers should also track the approximate hours each fee-based project takes. The regulation does not require a punch clock, but the salary-level calculation depends on knowing the hours worked. If an audit occurs and the employer cannot show that a particular fee clears the $684 threshold, the exemption is presumed lost. A simple log of project hours alongside the fee agreement is the cheapest insurance against that outcome.
What Misclassification Costs
When a fee arrangement fails the salary-level test, the worker is retroactively non-exempt. The employer owes overtime at one and a half times the regular rate for every hour the employee worked beyond 40 in each affected workweek.9Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
On top of back wages, the FLSA imposes liquidated damages equal to the unpaid amount, so total liability is double whatever overtime was owed.10Office of the Law Revision Counsel. 29 USC 216 – Penalties A court can reduce or eliminate liquidated damages if the employer demonstrates both good faith and reasonable grounds for believing the pay structure was lawful, but that is a high bar to clear.11Office of the Law Revision Counsel. 29 USC 260 – Liquidated Damages
These penalties make the per-project projection more than an accounting exercise. An employer who pays fees for dozens of small assignments over two or three years without checking the math on any of them can accumulate substantial exposure. The fix is simple: run the hourly-rate projection for every fee before work begins, and raise the fee if it falls short.