Exempt vs. Non-Exempt Employee - What’s the Difference?

Based on the Fair Labor Standards Act (FLSA) of the US, the main difference between an exempt and non-exempt employee is their eligibility for overtime pay.

Let’s break down what an exempt and non-exempt employee is!

Exempt Employee:

• An exempt employee is not eligible for overtime pay. Most salaried exempt employees receive a predetermined salary that generally does not change based on the number of hours worked.
• Exempt employees typically have a salary. Think executives, administrative employees, professionals (doctors, lawyers), and outside sales.
• Certain employees may be exempt from the FLSA’s minimum-wage and overtime requirements if they meet the requirements of a specific exemption.

Non-Exempt Employee:

• A non-exempt employee is eligible for overtime pay for any hours worked over 40 hours per week. Overtime rate pay should be at least 1.5x their regular pay.
• Non-exempt employees typically perform non-managerial or non-professional duties (servers, retail associates, factory workers).
• Additional requirements can differ based on state labor laws.

Should your employees be exempt or non-exempt?

Ask yourself the following questions to help determine this:

1. What are their annual earnings?
2. Are they performing physical labor?
3. What are their job duties?

If your employee earns less than $684 weekly or $35,568 annually, performs physical labor, and their duties do not require supervisory or decision making - your employee is non-exempt.

What about my part-time employees?

Part-time employment is not addressed in the FLSA, but the law still applies for overtime pay.

If the part-time employee is non-exempt and exceeds working 40-hours in a work week they should receive overtime.

Part-time employees are to be paid at least 1.5x their regular rate for each hour worked over 40 hours in a work week.

And exemptions? 

Certain employees might be excluded from receiving overtime pay, as well as both minimum wage and overtime pay - based on the FLSA.

These exemptions are very specific and as an employer, you should review and verify the requirements for each exemption.

Your local Wage and Hour Division (WHD) office can provide more information for you. Find your WHD here.

You can also find information about exemptions on the dol.gov website.

To wrap it up

The major difference between exempt and non-exempt is if they are eligible for overtime pay. Non-exempt are covered by the FLSA and there are specific guidelines you should follow.

Need help tracking hours? and overtime, contact MegaPay to help!