Glossary of Human Resources Management and Employee Benefit Terms
Exempt vs. non-exempt is a comparison between two types of employee classification. The biggest difference between an exempt and non-exempt employee is exempt employees are not legally required to be paid for overtime. Whether an employee is exempt or non-exempt generally depends on:
How much they are paid: Employees paid less than 23,600 dollars a year or 455 dollars a week are considered non-exempt.
How they are paid: If an employee has a guaranteed minimum amount they can earn, they are an exempt employee. Most often, this means a salaried employee.
What kind of work they do: Employees who meet both above standards to classify as exempt must also perform exempt job duties as outlined by the Fair Labor Standards Act (FLSA), meaning the employee must complete executive, professional, or administrative duties. The requirements for these categories are intentionally broad to include almost all employees who would be classified as exempt based on how much and how they are paid.
Exempt employees are “exempt” from receiving overtime pay under the law. Employers may choose to pay exempt employees for overtime if they wish, but this is uncommon. Exempt employees are most often paid a salary rather than an hourly wage and are therefore expected to complete a set amount of work rather than a set number of hours of work.
Non-exempt employees must be paid overtime wages. According to the FLSA, non-exempt employees are entitled to a federal minimum wage of no less than $7.50 per hour and overtime (any work over 40 hours in a workweek) pay at a rate of at least one and a half times their regular wage. Many states have expanded these guidelines and set their own laws for state minimum wage and overtime pay. These laws can be found on the individual states’ department of labor websites.