29 CFR 541.601The Highly Compensated Employee (HCE) Exemption: $107,432 in 2026
The HCE exemption is the FLSA's most generous classification: a relaxed duties test for employees who earn enough that Congress judged them unlikely to need overtime protection. But it has critical structural requirements that are frequently misunderstood - especially the $684/week salary floor within the total compensation figure.
Total annual compensation (2026)
$107,432This is the 2019 rule threshold, currently in force. The Biden-era increase to $151,164 was vacated November 2024.
Salary component requirement
$684/wkMust be paid as salary (not bonuses/commissions alone). This is a hard floor within the $107,432 total.
The HCE exemption requirements
Total annual compensation of at least $107,432
The employee must receive total annual compensation of at least $107,432/year. 'Total compensation' includes salary, commissions, and nondiscretionary bonuses. It does NOT include discretionary bonuses, board and lodging, 401(k) contributions, insurance premiums, or fringe benefits.
At least $684/week must be paid as salary
This is the critical point most summaries miss. The entire $107,432 cannot be composed of commissions and bonuses. At least $684/week must be paid on a true salary basis - a predetermined fixed amount that is not reduced based on quality or quantity of work. An employee earning $110,000 entirely in commission (no guaranteed salary) does not qualify.
Office or non-manual work
The HCE exemption is available only for employees who perform office or non-manual work. Manual workers are specifically excluded regardless of their compensation level (29 CFR 541.601(d)). A union construction worker earning $200,000/year is not HCE-exempt.
Customarily and regularly performs at least one exempt duty
This is the 'relaxed' duties test. Instead of requiring management or professional expertise as the primary duty, the HCE exemption only requires that the employee customarily and regularly perform at least one of the executive, administrative, or professional exempt duties. Under 29 CFR 541.701, 'customarily and regularly' means more than occasionally but less than constantly.
What counts toward the $107,432
Counts toward $107,432:
- ✓Salary
- ✓Nondiscretionary bonuses (earned per formula, not employer whim)
- ✓Commissions
- ✓Other nondiscretionary compensation
Does NOT count:
- ✗Discretionary bonuses (paid at employer's sole discretion)
- ✗Employer contributions to 401(k) or pension
- ✗Health/life insurance premiums
- ✗Board, lodging, meals
- ✗Fringe benefits
- ✗Overtime pay itself
The "catch-up" payment rule
If an employee's total annual compensation has not reached $107,432 by the end of the year, the employer has one final pay period (the pay period immediately following the end of the 52-week period) to make a "catch-up" payment to bring the employee over the threshold and preserve HCE status for the preceding year.
This provision gives employers who use variable compensation (commission-heavy roles) a mechanism to confirm HCE status retrospectively. If the catch-up payment is not made within the required window, the employee must have been paid overtime for any overtime hours worked during the year.
Concrete examples
Senior sales manager, $90k base salary, $30k annual commission. Regularly supervises two sales reps and makes staffing recommendations that are given weight by the VP.
Total compensation is $120k, exceeding the $107,432 threshold. The $90k base salary provides $1,731/wk, far above the $684/wk salary component requirement. The employee performs non-manual work. The employee customarily and regularly performs at least one executive exempt duty (supervising employees and making recommendations given weight). All four HCE requirements are met.
High-earning consultant earning $115k base salary. Primary duty is applying a proprietary consulting methodology following a detailed template. No supervisory responsibilities, no discretion in methodology.
Total compensation and salary component both clear the thresholds, and the work is non-manual. But the HCE exemption still requires customarily and regularly performing at least one exempt duty. Applying a standardised methodology template, even expertly, does not constitute an executive, administrative, or professional exempt duty. This employee does not exercise management, real discretion on significant matters, or advanced professional expertise - so the relaxed duties test still fails.
Union welder at an industrial plant, earning $115k annually in overtime-heavy weeks.
The HCE exemption explicitly excludes manual workers regardless of compensation (29 CFR 541.601(d)). A highly-paid skilled trades worker, union or non-union, cannot qualify for the HCE exemption. The welder is entitled to overtime pay for all hours over 40 per week, regardless of total earnings.
The threshold history and the vacated Biden increase
The HCE threshold was $100,000/year prior to the 2019 Trump DOL rule, which raised it to $107,432. The Biden-era rule published in April 2024 would have raised it to $151,164, with a further automatic increase scheduled for January 2025. Both increases were vacated by the Eastern District of Texas on 15 November 2024 in State of Texas v. U.S. Department of Labor.
As of April 2026, the $107,432 threshold remains in force. This is relevant for employers who were preparing to raise compensation to meet the anticipated $151,164 threshold - the compliance cost was avoided by the vacatur, but employees who received raises in anticipation of the new rule retain those higher salaries.
Educational content only. Employment classification is fact-specific; consult an employment attorney or your state labour department. Data verified April 2026.