Learn about Exempt vs. Non-Exempt and more with Workstream and improve your hiring vocabulary. Workstream helps companies hire better, faster - everyday.
In the work environment, there are generally two classifications of employees. An employee is either “exempt” or “non-exempt”. Knowing the distinction between the two has its benefits. For employers, it will give a clearer picture of your responsibilities. If you are an employee, it will empower you to know what you are entitled to, what to expect, and what not to expect. Let’s talk about what those are.
What is Exempt vs. Non-Exempt?
When we talk about “exempt vs. non-exempt”, it is essentially about comparing the two different types of employee classification.
It is important to know how an employee falls into each category. Three factors determine if an employee is exempt or non-exempt.
How much are they paid? If an employee is paid less than $684 fixed salary per week or $35,568 per year, they are considered non-exempt.
How are they paid? If an employee is guaranteed to receive regular, consistent pay that they will earn regardless of the number of hours that they work, this means that they are salaried. They are considered exempt.
What kind of work do they do? Those who meet the first two standards must also perform job duties that are considered non-exempt based on the Fair Labor Standards Act (FLSA). The employee must do executive, administrative, or professional job duties to be considered exempt.
Satisfying all three factors above is required to consider an individual to be an exempt employee.
What is the importance of knowing whether an employee is exempt or non-exempt?
It is important to know whether an employee is exempt or non-exempt because it has a lot to do with wages. The primary difference between the two is that exempt employees do not qualify for minimum wage and they are also not entitled to overtime pay.
Who are exempt employees?
As per FLSA standards, employers are not legally required to pay exempt employees for overtime hours. While this is the law, employers can still choose to give overtime pay to exempt employees. But they do not have to.
Who are non-exempt employees?
Non-exempt employees are usually paid by the hour. According to the FLSA, non-exempt employees are entitled to overtime pay and also qualify for the minimum wage requirements. The current federal minimum wage for 2021 is $7.25 per hour. For any work done that is over 40 hours per workweek, employers need to pay non-exempt employees no less than time and a half of the employee’s regular rate per hour.
Please note that there are states in the U.S. that have expanded the guidelines and have set their standards regarding state minimum wage and overtime pay. Employers are responsible for finding out these guidelines and adhering to both federal and state laws.
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