Exempt vs Non-Exempt Employees

Whether or not an employee is considered “exempt” impacts how you process their payroll.

The Fair Labor Standards Act (FLSA) protects non-exempt employees. As a result, they must earn at least the minimum wage and receive overtime pay.

Exempt Employees

In order to be exempt, an employee must meet all three the following requirements set by the FLSA.

1. Be paid a salary (as opposed to being paid hourly)
2. Earn at least $35,568/year
• Employers may use non-discretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis, to satisfy up to 10 percent of the standard salary level
3. Perform exempt job duties

Exempt Job Duties

Exempt job duties include executive, administrative, professional, computer, and outside sales employees.The Department of Labor (DOL) provides a helpful fact sheet with more information on all of the requirements that need to be met for an employee’s job duties to qualify for an exemption.

Highly compensated employees who earn at least $107,432/year or more are exempt from the FLSA if they regularly perform at least one of the duties of an exempt executive, administrative, or professional employee identified in the standard tests for exemption.

Non Exempt Employees

Otherwise, an employee is not considered exempt and protected under the FLSA.

A nonexempt employee should be paid at least minimum wage and 1.5 times their hourly rate if they work more than 40 hours a week.

Some states have different minimum wage and overtime laws. When state laws differ from the federal FLSA, you must comply with the standard most protective to employees. Check with your local labor department to learn more.

Nonexempt employees meet at least one of the following requirements:

1. Receive an hourly wage
2. Earns less than $35,568/year
3. Does not perform exempt job duties

Blue-collar workers do not qualify for an exemption no matter how highly they are paid. Police, firefighters, paramedics, and other first responders also do not qualify for the exemption.

Many non-exempt employees are hourly workers. However, non-exempt workers can earn salaries.