Exempt and Non-Exempt Employees: What's the Difference and How to Classify Them

Knowing and understanding the difference between exempt and non-exempt employees helps ensure you are in compliance with employment laws and will save you from legal trouble. Plus, it'll help you avoid confusing payroll or scheduling issues, and ensure your employees are getting the right hours, overtime, and benefits.

Not sure what the key differences are between exempt and non-exempt employees? We'll walk you through how to properly classify workers and discuss specific labor laws that are important to follow, including at the state level. This way you can both protect your small business and ensure that you are treating your employees fairly.

Key points to remember What is an exempt employee Advantages and disadvantages of exempt employees What is a non-exempt employee? Advantages and disadvantages of non-exempt employees How to Classify Exempt and Non-Exempt Employees State laws on exempt and non-exempt employees Classify your company's employees Save time on payroll.

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What is an exempt employee?

An exempt employee is a person who is exempt from the overtime pay requirements of the Fair Labor Standards Act (FLSA) and is not entitled to a guaranteed minimum wage.

Exempt employees generally receive wages and perform tasks that are considered "exempt" from overtime pay. This is because their salaries are above the levels set by the FLSA and meet other exemption requirements. Thus, if they work more than 40 hours per week, they do not receive additional remuneration. They are also excluded from certain labor law protections, such as meal breaks and breaks. Exempt employees are generally classified as executive, administrative, professional, or outside sales employees, such as lawyers, doctors, teachers, and architects.

To be considered exempt, staff members must meet specific criteria, such as performing exempt duties and earning a minimum wage of $684 per week (based on 2023 data). These employees generally have more flexibility in their schedules and are not required to follow the same time tracking requirements as non-exempt employees, who often follow a predefined hourly schedule.

Exempt Employee Benefits

There are several benefits associated with hiring exempt workers, such as no overtime pay requirements, higher skill levels, and higher employee satisfaction. More detailed benefits include the fact that they:

Are not entitled to overtime pay, which can help the company find ways to reduce labor costs. Are generally more experienced and skilled than non-exempt employees due to higher education or additional training, which can lead to higher productivity and better quality of work. Have more flexibility in their work schedules, so they should be able to work more efficiently and manage their time better. Often have more autonomy and decision-making power, which can reduce micromanagement on your end and give you more time to focus on other aspects of your business. Are generally paid more than non-exempt employees, which means they are more satisfied with their jobs and feel more loyal to your company. It can also help with employee retention. Disadvantages of exempt employees

While exempt workers have their advantages, there are also many disadvantages to consider, such as burnout, potential legal liability, and communication risks. Some more detailed cons...