When it comes to the world of employment, there are two types of employees: exempt and non-exempt. While the terms may sound similar, they have very different meanings that can impact how much employees are paid and how much time employees get off from work. In this post, we'll dive into what makes each employee type unique.
Requirements Under the Fair Labor Standards Act (FLSA)
As an employer, you have to classify your employees correctly or risk costly compliance violations. The key difference between exempt and non-exempt employees is that non-exempt workers are entitled to certain protections under the Fair Labor Standards Act (FLSA), a federal law that sets minimum wage and overtime requirements. The U.S. Department of Labor enforces the FLSA by ensuring that employers maintain accurate records of employee hours worked and compensation paid, including their pay rate per hour and total earnings.
Exempt Employees
Exempt employees are not entitled to overtime compensation. They are paid a salary, and they work on a monthly basis. These types of employees typically hold managerial or professional positions.
To qualify as exempt, an employee must meet certain requirements:
- The employee is salaried and receives at least $35,568 per year.
- The employee's primary duty must be managing the company or serving as its official representative.
- The employer cannot require the employee to perform any duties other than those that are described in their job description.
Exempt employees are not covered by the Fair Labor Standards Act (FLSA) and therefore do not have to be paid overtime when they work more than 40 hours per week. They also don't have to be paid time-and-a-half for working over eight hours in a day or 40 hours in a week, nor must they be provided with meal breaks or rest periods.
Non-Exempt Employees
Non-exempt employees, on the other hand, are hourly employees who are covered by the Fair Labor Standards Act (FLSA). They're typically paid on an hourly basis and receive overtime pay.
These are some things to know about non-exempt employees:
- They earn at least the minimum wage for all hours worked in a work week.
- Their pay is based entirely on time worked or number of pieces produced, not quality or quantity of work completed.
Aside from being subject to FLSA regulations, non-exempt employees also have their time tracked and logged by employers. This allows employers to maintain accurate payroll records, which can be crucial when dealing with taxes or lawsuits over workplace disputes.
Employee Classification
There are many different kinds of employees, but it's important to classify them correctly. If you don't, you could end up paying costly compliance violations.
To determine whether an employee should be exempt from overtime pay, employers should consider the following three factors:
- The employee's salary level
- You will need to pay them at least $684 per week or $35,568 per year.
- The employee's salary basis
- You will need to provide regular payments and at a fixed rate proportionate to the annual salary regardless of the total hours worked.
- The employee's job duties
- You will need to assign your employee tasks consistent with those performed in the administrative, professional, executive, computer or outside sales fields.
Both exempt and non-exempt employees are entitled to certain benefits, such as minimum wage, overtime pay and rest breaks. However, the key difference between these two categories is that exempt employees can be paid less than their non-exempt counterparts for performing the same job duties.
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