What is the difference between non exempt and exempt employees

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, a federal law that sets minimum wage and overtime requirements. And although the FLSA has evolved since its passage in , one thing remains the same — employers must classify their employees correctly or risk costly compliance violations. Employees exempt from the FLSA typically must be paid a salary above a certain level and work in an administrative, professional, executive, computer or outside sales role.

The Department of Labor DOL has a duties test that can help employers determine who meets this exemption criteria. Employers are not required to pay overtime to employees who are properly classified as exempt. They may, however, choose to compensate such individuals for extra hours worked through benefits packages.

If employees are non-exempt, it means they are entitled to minimum wage and overtime pay when they work more than 40 hours per week. The FLSA governs federal minimum wage, overtime, recordkeeping and youth employment for individuals working in both the private and public sectors. Some state and local jurisdictions, however, have their own wage and hour laws. In these cases, the DOL says that employers must apply the minimum wage or overtime rate that is most favorable to the employee.

According to the FLSA, employers must pay non-exempt employees no less than time and one half their regular pay rate for each hour over 40 in a workweek. Vacation, holidays or sick days should not be included when performing these calculations unless the employee worked on those days. The DOL has established guidelines to determine who is eligible for overtime pay. If you have been discriminated against, retaliated against, denied your rightful wages , or wrongfully terminated , our attorneys are here to help.

Need legal help? We provide free, confidential consultations to California workers. You should contact us as soon as possible to make sure your claim is still within the time limits set by law.

If you are a victim of wage theft or other violations of the employment laws, contact us today through our website or give us a call at to schedule a free consultation. People often want to understand the rules regarding "classification" of employees. These rules determine whether you are subject An exempt employee is type of employee that is exempt from many Under state and federal law, non-exempt workers must be paid a minimum wage for all hours worked.

California has enacted one of May 03, As an employer, you've probably heard about exempt and non-exempt employees at least once.

That's because all employees fall into one of these two categories. Exempt or Non-Exempt? Our guide breaks down exempt and non-exempt employees. Thanks for downloading! If the requested file does not load in a new window, click here. In , the U.

The term commonly refers to exemptions for executive, administrative, professional, outside sales, and computer professional employees. In general, an employee must meet certain tests to qualify as exempt from minimum wage and overtime pay:. For certain exemptions an employee must be paid a fixed salary. Be sure to check applicable state law as the salary basis requirements may vary. The job duties tests have many detailed components that are specific to each white collar exemption.

Many of the exemptions require that the employee have management authority or regularly exercise discretion and independent judgment in performing her job duties. Some states have different duties requirements than those under the FLSA, so make sure to check the specific requirements for any location where you have employees. Generally speaking, an exempt employee must be paid the same amount for any week in which the employee performs any work, regardless of the number of days or hours worked.

Non-exempt employees must receive at least the minimum wage for all hours worked and are entitled to overtime pay. Generally, employees are considered non-exempt unless an exemption applies. Although non-exempt employees typically receive hourly pay, employers can pay them on a salary basis and pay applicable overtime.

However, Gerlick warned that exempt employees typically cost more than their nonexempt counterparts, largely due to the expectation that they will use discretion and judgment in executing their duties. Cairns said the primary benefits of exempt employees include paycheck stability, eligibility for benefits, and standard business hours.

However, employees with exempt status generally have less-flexible work schedules than nonexempt employees, and they can't be paid overtime, even if they work more than 40 hours a week. Key takeaway: Exempt employees are not owed overtime pay, which helps employers stay within their budget. Exempt employees are also eligible for benefits. However, they have less flexibility in their schedules, and they may work more than 40 hours a week without additional compensation.

Hiring nonexempt employees comes with its own set of benefits and drawbacks for employers and employees alike. Hiring a nonexempt employee offers flexibility for employers, since there is no minimum requirement for how many hours they should work each week.

You can pay a nonexempt employee an hourly rate minimum wage or higher and schedule them based on your company's needs. There are a few drawbacks to hiring nonexempt employees, the primary one being overtime pay for employees who work more than 40 hours a week.

You will need to accurately monitor and track employee hours to ensure that they are being accurately compensated for their time. Although the most obvious benefit for nonexempt employees is the ability to work overtime and receive proper compensation for every hour worked, Cairns said there are drawbacks that nonexempt employees should know about. Since hours can vary week to week, nonexempt employees may not have a stable or consistent paycheck, their work hours may not adhere to standard business hours, and, in some states, they may not be eligible for paid vacation or sick time.

Key takeaway: Nonexempt employees offer employers flexibility for hours worked, but those who work more than 40 hours a week are owed overtime. Employees receive accurate pay for actual hours worked, but their paychecks may fluctuate as hours worked can vary from week to week.

When creating job titles and descriptions for your employees, consider which category exempt or nonexempt will benefit your company the most. Review what duties you will need to be completed and what type of payment you would like to pay salary or hourly. Cairns said that some types of jobs are legally required to be exempt and can only be hired as such. However, for positions that can be modified to fit one category or the other, Gerlick said business owners must decide which is more important: flexibility or expertise.

As a rule of thumb, nonexempt employees are better suited to hourly, temporary, or seasonal work, whereas exempt employees are more suited to long-term positions with executive, administrative, or professional duties.

It is important to differentiate these positions based on the actual duties and then hold your employees accountable to the set guidelines. Gerlick said a common mistake for business owners is designing a job that qualifies as exempt, but then not allowing that employee to exercise the judgment and discretion commensurate with the job description. This mistake can be very costly to your business: If that employee decides to take legal action, they can use the FLSA to support their claims against you.