Exempt vs. Non-exempt Employees

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Exempt or non-exempt ... what does it mean? In this lesson, we'll break down the exempt versus non-exempt status, what it means to employers, and the significance of each classification for your paycheck.

Which One Are You?

There are all kinds of different employees in a given business. You may be full-time, part-time, temporary, at-will, leased, or an independent contractor. You might even have a variety of job titles: administrator, specialist, line worker, secretary, or manager.

But, did you know there's another title attached to a position? That's the difference between an exempt and a non-exempt employee. And, all employers are required to classify a position as one or the other. Let's find out what each classification means and how it applies to an employee.

Exempt or Non-Exempt

The concept of an exempt versus a non-exempt employee is not a complicated one, but it is critical, particularly when it comes to tracking time at work and being compensated for overtime. Here's a breakdown:

Exempt

Carol is the marketing director at a large law firm in downtown Boston. She gets paid $80,000 annually. Carol is an exempt employee. But, how do we know? Usually, exempt employees receive an annual salary, rather than an hourly rate. Since she's making an $80,000, her role as an exempt employee is solidified. What is she exempt from, though?

Unlike non-exempt employees, exempt workers do not track the time they spend at their job.
clocking in, time clock, exempt, nonexempt, FSLA

Carol's role as an exempt employee means that she's not subject to tracking her time, such as punching into a time clock or turning in a time card to her Human Resources department. She's also exempt from claiming overtime hours. That means, if Carol works 40 hours a week or 60 hours a week, her pay will stay the same.

Exempt employees can generally be found performing more high-level, professional type jobs. Think of these folks as ones with advanced degrees or formal training such as doctors, teachers, lawyers, or in Carol's case, marketing professionals. Carol is a ''white-collar'' employee because she works in an office or administrative setting.

When calculating Carol's paycheck, accounting gets off easy because there's no need to configure how many hours she's worked or how much extra pay she's due for working more than her required 40 hours. Her salary is set and her paycheck remains the same every pay period.

Under the government's Fair Labor Standards Act (FLSA), an employee is considered exempt if:

  • They're paid at least $23,660 per year ($455 per week)
  • They're paid on a salary basis.
  • They perform exempt job duties, such as those learned through formal education or training.

Nonexempt

Debbie holds a job as a telemarketer for a large online retailer based in Seattle. She spends her days fielding product inquiries and handling problems from customers while seated at her desk in a large call center complex. She makes $10 an hour, and though she usually works 40 hours per week, the busy season after Christmas typically means she'll get some overtime hours - and their accompanying pay.

Nonexempt employees are generally found in more ''blue-collar'' environments such as automotive or assembly plants, fast-food restaurants, and retail stores. These employees typically perform manual labor style jobs or non-management roles. These workers are paid by the hour, rather than with a set salary.

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