How to Classify Exempt vs. Non-Exempt Employees

You’ve probably heard the terms, exempt and non-exempt, but do you know how to classify the two? The differences between exempt employees and non-exempt employees can cause a lot of confusion for both workers and employers. Whether or not you are entitled to minimum wage and/or overtime pay for working more than 40 hours per week depends on your exemption status, as governed by the federal Fair Labor Standards Act (FLSA). In order to adhere to FLSA, it’s important to correctly classify your employees as exempt vs. non-exempt. What’s the difference between these types of workers and the jobs they hold? Let’s take a look!

Exempt Employee

Exempt positions are excluded from minimum wage, overtime regulations, and other rights and protections afforded to non-exempt workers. Employers must pay a salary rather than an hourly wage for a position for it to be exempt. In general, an employee must meet all the standards of three different tests to qualify as exempt from minimum wage and overtime pay. 2

Those three tests include:

  1. JOB DUTIES: The employee’s job duties must primarily involve executive, administrative or professional duties as defined by the regulations.
  2. SALARY BASIS: The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed. 1
  3. SALARY LEVEL: The amount of salary paid must meet a minimum specified amount of $23,660, unless and until that figure is revised upward. 1

Exempt employees are generally expected to devote the number of hours necessary to complete their respective tasks, regardless of whether that requires 35 hours per week or 55 hours per week. Their compensation doesn’t change based on actual hours expended. Exempt employees aren’t paid extra for putting in more than 40 hours per week; they’re paid for getting the job done.

Non-exempt Employee

Employees who fall within this category must be paid at least the federal minimum wage for each hour worked and given overtime pay of not less than one-and-a-half times their hourly rate for any hours worked beyond 40 each week.3 For example, if an employee worked 60 hours, they would receive their regular rate of pay for 40 hours, plus an additional 20 hours at the overtime rate.

So, is being an exempt or non-exempt employee better?

That depends on you! Some people would rather be employed in non-exempt positions to ensure they are being paid every hour they work. Others prefer a salaried position that allows more flexibility with actual hours worked.

Generally, exempt employees are paid more than non-exempt employees because they are required to complete a job/tasks regardless of the hours it takes to do them. If coming in early and staying late is expected in order to do your job, exempt employees are required to do so. Non-exempt employees typically work a 40-hour work week or less and must be paid for their extra hours worked. On the flip side, an exempt employee may be able to leave work early at times and still get paid, where a non-exempt employee is unable to earn money if they are not working.

Need help determining whether your employee is exempt or non-exempt? Give us a call and we’re happy to help.


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