There are two classifications of employees: exempt and non-exempt. An exempt employee is not entitled to overtime pay by the Fair Labor Standards Act (FLSA), even if it takes 55 hours to finish their weekly workload. Exempt employees must earn a minimum of $455 per week. Non-exempt employees are protected by FLSA regulations and are paid overtime. Regardless whether or not they’re paid hourly or a salary, they must be paid at least the federal minimum wage.
That’s the condensed version, but we’re going to go into more detail in order to give you a full understanding of the differences between exempt and non-exempt employees.
An explanation of exempt vs. non-exempt employees
There are a few distinctions between exempt and non-exempt employees, but the biggest difference is overtime pay. Exempt employees are not entitled to overtime pay by the Fair Labor Standards Act. They’re paid a salary and expected to complete their weekly tasks like other employees, whether it takes 30 hours or 60. In order to be classified as an exempt employee they must be paid a minimum of $455 per week, or $23,660 a year, instead of an hourly basis.
Exempt employee status applies most commonly to professional and executive employees, such as:
Artistic and Creative Employees
Non-exempt employees are required by FLSA to be paid overtime. Any hours worked past 40 hours must be paid out at one and a half times their standard hourly rate. And, as you might expect, they are not exempt from FLSA regulations. However, non-exempt employees can be paid either a salary or an hourly rate. There are countless examples of non-exempt employees, but the following are always considered non-exempt, even if they would otherwise meet exempt criteria:
Let’s look at a clear example of exempt vs non-exempt employees
Our exempt employee, Katie, is a graphic designer. She’s freaking out on a Friday at 4:00 PM because she hasn’t finished a mobile design proposal due the following Monday. She makes a pot of coffee and stays late in the office Friday night to finish up the proposal. Her next pay check is the same as her last pay period, despite putting in extra hours (and a whole lot of stress).
During the same week, Kyle is working on the ground floor of the office packing and shipping out materials. He has the option of picking up extra shifts, and decides to work overtime on the same Friday Katie spends on her design proposal. When he receives his next paycheck, he’ll see the overtime reflected as 1.5 times his normal hourly rate.
So the next time you encounter these terms on a job posting or in conversation you’ll have a simple, detailed explanation of each classification.