Learn the essentials about exempt and non-exempt employees, including their requirements and typical responsibilities.

exempt and non-exempt employees

Employee Classification:

• Exempt Employees: Meet certain eligibility requirements and have different workplace benefits.

• Non-Exempt Employees: Have their specific requirements and benefits.

Knowing your employees' classification helps you assign duties and compensation correctly.

What is an Exempt Employee?

An exempt employee does not receive overtime pay and is excluded from minimum wage requirements. The key difference between exempt and non-exempt employees is that exempt employees are paid a salary, while non-exempt employees earn an hourly wage.

Exempt Employee Benefits:

• No Overtime Pay: The Fair Labor Standards Act (FLSA) does not guarantee overtime pay for exempt employees. Employers decide on overtime compensation.

• Salary Basis: Exempt employees receive a fixed salary regardless of hours worked.

Legal Considerations:

• FLSA and Other Laws: Both federal and state laws determine employee classification and rights. It's crucial to understand these laws to classify employees correctly.

What is a Non-Exempt Employee?

Non-exempt employees are eligible for overtime pay and earn hourly wages. They must be paid overtime for any hours worked over 40 in a week.

Requirements for Exempt Employees

To be considered exempt, employees must meet three main requirements:

1. Salary Payment

   • Exempt employees earn a salary instead of an hourly wage.

   • They must receive a monthly payment higher than the FLSA minimum, regardless of hours worked.

2. Total Earnings

   • Employees must earn at least the salary threshold set by the FLSA.

   • As of July 2024, this threshold is $844 per week or $43,888 per year.

   • This threshold is increasing on Jan 1, 2025, to $1,128 per week or $58,656

   • Employees earning below this amount are non-exempt.

3. Job Duties

   • The exemption applies to professional roles requiring higher expertise and knowledge.

Types of Exempt Employees

1. Executive Exemption

   • Supervises two or more full-time or four part-time employees.

   • Manages part of the business.

   • Influences job status of other employees, like hiring or delegating tasks.

2. Administrative Exemption

   • Performs office work related to business operations or management.

   • Makes important business decisions independently.

3. Professional Exemption

   • Requires specialized education and judgment.

   • Holds a college degree or higher in their field.

   • Includes creative professionals working in artistic fields.

4. Computer Exemption

   • Must meet exemption requirements and have a computer-related role.

5. Highly Compensated Employees

   • Hold office or non-manual jobs.

   • Earns the FLSA’s minimum salary for highly compensated employees.

   • Performs at least one duty of an exempt administrative, professional, or executive employee.

6. Outside Sales Exemption

   • Primarily makes sales or secures contracts.

   • Works outside the employer’s business premises.

Examples of Exempt vs. Non-Exempt Employees

Exempt Employees:

• Administrative Employees: Support staff in human resources, accounting, legal, public relations, compliance, finance, payroll, etc.

• Executive Employees: Roles like CEO, managers, supervisors, and other decision-makers.

• Professional Employees: Jobs requiring advanced education, such as doctors, lawyers, engineers, registered nurses, dentists, architects, and teachers.

• Creative Professionals: Writers, actors, musicians, journalists, artists, and composers.

• Outside Sales Employees: Salespeople and marketers.

• Computer-Related Jobs: Computer programmers, software engineers, and systems analysts.

Non-Exempt Employees:

• Guaranteed an hourly wage and overtime pay under the FLSA.

• Must earn at least the federal or state minimum wage for every hour worked, plus overtime pay for any time over 40 hours a week.

• Jobs that don't meet exempt criteria, such as:

  • Interns

  • Servers

  • Retail Associates

  • Similar positions

• These employees follow supervisors' directions and do not hold administrative or executive roles, even if they earn more than the federal minimum wage.

Exempt Employee FAQs

Can exempt employees get overtime?

• No, exempt employees do not get paid extra for working more than 40 hours a week.

Can an exempt employee be suspended without pay?

• Yes, employers can suspend exempt employees without pay if they break workplace rules.

Do exempt employees have a special tax status?

• No, exempt employees pay taxes just like everyone else.