Before you landed your current job, you had spent hours and hours job searching—during which you might have noticed the terms “exempt” and “non-exempt” on some of the job postings you came across. These terms refer to the two types of employees working in companies today. If you are not sure what they mean or which category you fall under, that’s a problem.
As an employee, it is important to know what type of employee you are. Why? Because that will determine what benefits you are entitled to receive as an employee. You cannot be a workhorse every day without knowing what your rights and entitlements are!
With the help of this article from Turner Freeman Lawyers, we will break down the differences between exempt and non-exempt employees in terms of entitlements.
Exempt vs Non-Exempt Employees
Is your salary fixed every month, no matter how many days you work? Then you are considered an exempt employee. Also called “salaried employees,” exempt employees usually have a definite number of work hours a day and are compensated with a fixed salary each month. And when we say fixed, we mean you get a constant salary each month regardless of whether you worked some extra hours more than your required number of hours per day last week. Even if you took a day or two off last week, you can trust that your salary will remain fixed.
But why are you called exempt? Basically because you are exempt from the Federal Fair Labor Standards Act’s Minimum Wage and Overtime provisions. When you are an exempt employee, the time you log in and out of work is not that important, so you are set up with a Standard Timesheet Format.
Keep in mind that your exempt or non-exempt status as an employee has very little to do with your job title but has much more to do with your level of responsibility or status as a professional. For you to be considered exempt, your duties should also be exempt duties based on the FLSA’s standards. These jobs fall under five general categories, although there are still some other miscellaneous exemptions. These categories are as follows:
- Executive. If your job mainly has to do with managing an enterprise or managing a customarily recognized department of that enterprise, you are considered to be exempt. You should also be able to customarily oversee at least two full-time employees or their equivalent and should have the power to hire and fire employees.
- Administrative. You are also considered exempt if your primary duty involves performing non-manual work that is directly related to the management of a business. If you are in charge of the general business operations of your employer or the customers of your employer and are able to exercise your independent judgment in making decisions, you fall under this category and are exempt.
- Professional. If your primary duty has to do with performing work that requires advanced knowledge in a specific field, particularly in the fields of science and learning, then you are a considered a professional employee and are also exempt. This work requires an advanced degree and should be creative in nature.
- Computer employees. Certain computer professionals are also considered exempt under the Professional exemption, provided that they meet certain criteria and receive a fixed salary or an hourly basis that is at least $27.63 per hour. These jobs include computer systems analyst, computer programmer, software engineer, or other jobs in the computer field. The FLSA also requires that an employee’s primary duty consists of applying systems analysis techniques and procedures; designing, developing, documenting, analyzing, creating, testing, or modifying computer systems based on specific design specifications; and designing, documenting, testing, creating, or modifying computer programs that are related to machine operating systems.
- Outside Sales Employee. If your primary duty involves selling or obtaining orders or service contracts, you are considered an outside sales employee and are therefore exempt. You must also be customarily conducting business away from your employer’s place of business.
On the flip side, non-exempt employees work on hourly basis and are paid based on the number of hours they have worked within a given pay period. Unlike exempt employees who are exempt from the provisions of the FLSA, non-exempt employees are eligible for the FLSA’s Wage and Overtime provisions. If you belong to this category, the time you punch in and out of work is very crucial because it is what will determine how much you earn for a certain period. Unlike exempt employees who are set up with a Standard Timesheet Format, non-exempt employees are set up with an In-Out Timesheet Format.
Usually, non-exempt employees are blue collar workers who make significantly less than exempt employees—usually $684 per week—resulting in an annual threshold of $35,568. Employees who fall under this category are directly supervised by the higher-ups and cannot be employed in a “bona fide executive, administrative, outside salesman, or professional capacity,” according to the FLSA.
If your role in your office is professional, executive, outside sales, or administrative, you are most likely an exempt employee—meaning you are given a fixed salary each month and are expected to complete all the tasks required of you, whether that takes 20 hours or 50 in a week. But while getting a fixed salary sounds nice, as an exempt employee you are also excluded from many of the FLSA protections afforded by your non-exempt counterparts.
Perhaps one of the major differences between the two types of employees is how they are paid for the hours they work overtime. Unlike non-exempt employees, exempt employees are not entitled overtime pay by the FLSA. That means if you earn $455 a week in the form of a salary and not on an hourly basis, that is just about how much you earn regardless of whether you worked overtime every single day for the past few days. One the other hand, since non-exempt employees do not have a fixed salary and are paid based on the number of hours they work, they are paid overtime for the hours they worked beyond 40 each week. And the rate? One and a half times their hourly rate!
Being an exempt or a non-exempt employee has its own pros and cons. While exempt employees are paid a fixed salary for the work they do, they are not legally entitled to overtime pay. Non-exempt workers, on the other hand, are paid an hourly wage, but they are entitled to overtime pay when they are required to work in excess of 40 hours. Despite their different entitlements, both categories of workers are equally eligible for government employment benefits, such as weekly unemployment payments in case they lose their jobs, as well as Social Security benefits when they retire.