They may, however, choose to compensate such individuals for extra hours worked through benefits packages. If employees are non-exempt, it means they are entitled to minimum wage and overtime pay when they work more than 40 hours per week. The FLSA governs federal minimum wage, overtime, recordkeeping and youth employment for individuals working in both the private and public sectors.
Some state and local jurisdictions, however, have their own wage and hour laws. In these cases, the DOL says that employers must apply the minimum wage or overtime rate that is most favorable to the employee. According to the FLSA, employers must pay non-exempt employees no less than time and one half their regular pay rate for each hour over 40 in a workweek. Vacation, holidays or sick days should not be included when performing these calculations unless the employee worked on those days.
The DOL has established guidelines to determine who is eligible for overtime pay. For instance, employers who have hourly workers must track time and attendance to ensure payroll accuracy. Employers should not automatically assume that employees can properly be considered exempt under the FLSA just because they earn a salary.
Some industries may have hourly employees who are exempt from overtime pay. The more notable examples include the agriculture, movie theater and railroad businesses. Failure to properly distinguish exempt from non-exempt employees, sometimes referred to as misclassification, can adversely affect businesses.
You may be trying to access this site from a secured browser on the server. Please enable scripts and reload this page. Reuse Permissions. Page Content. Exempt : An individual who is exempt from the overtime provisions of the Fair Labor Standards Act FLSA because he or she is classified as an executive, professional, administrative or outside sales employee, and meets the specific criteria for the exemption.
Certain computer professionals may also be exempt. With some limited exceptions, exempt employees must be paid on a salary basis. Nonexempt : An individual who is not exempt from the overtime provisions of the FLSA and is therefore entitled to overtime pay for all hours worked beyond 40 in a workweek as well as any state overtime provisions.
Nonexempt employees may be paid on a salary, hourly or other basis. Salaried : An individual who receives the same salary from week to week regardless of how many hours he or she works.
Not all states have the same guidelines for exempt employees. For example, to classify an individual as exempt from overtime requirements in California, employers must pay the worker at least twice the prevailing minimum wage. All other employees would automatically be eligible for overtime regardless of job responsibilities. Workers earning over the salary threshold would still need to meet the other criteria for exempt status to be placed in that category.
Also, non-exempt employees must be paid overtime wages equivalent to at least 1. In New York, the state's minimum salary threshold for executive and administrative employees has been increased in phases, and the actual rate depends on geographic location and employer size. Check with your state labor department for the latest overtime provisions in your area.
The information contained in this article is not legal advice and is not a substitute for such advice. Department of Labor.
State of California Department of Industrial Relations. New York State Labor Department. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile.
As a rule of thumb, nonexempt employees are better suited to hourly, temporary, or seasonal work, whereas exempt employees are more suited to long-term positions with executive, administrative, or professional duties. It is important to differentiate these positions based on the actual duties and then hold your employees accountable to the set guidelines. Gerlick said a common mistake for business owners is designing a job that qualifies as exempt, but then not allowing that employee to exercise the judgment and discretion commensurate with the job description.
This mistake can be very costly to your business: If that employee decides to take legal action, they can use the FLSA to support their claims against you.
Issues don't typically arise until an unhappy employee files a lawsuit. Key takeaway : When determining whether to hire an exempt or nonexempt employee, consider the job description, length of the job temporary, short-term, or permanent , whether the position is part time or full time, and the type of candidate you want to hire. Exempt vs. Nonexempt: What Is the Difference?
Skye Schooley. Learn the difference between hiring exempt and nonexempt employees. Business owners need to properly classify their employees as exempt or nonexempt to avoid legal ramifications supported by the Fair Labor Standards Act FLSA. Nonexempt employees have no limitations or requirements for the number of hours they can work each week, but they must receive overtime pay if they work more than 40 hours in one week. This article is for employers who are trying to make the determination between exempt and nonexempt employees.
What are exempt employees? What are nonexempt employees? Overtime pay: Exempt vs. How to classify exempt vs. Salary basis test: An employee who receives a guaranteed minimum compensation, regardless of the time actually worked, qualifies but is not guaranteed as exempt. Duties test: An employee who meets the exemption requirements of tests one and two must also perform an exempt job duty, which can be one or more of the following: Exempt executive duties: The employee supervises two or more other employees as a regular part of their job.
Exempt professional duties: The employee performs intellectual activities that require specialized education and the use of discretion and judgment. Exempt administrative duties: The employee performs support operations for significant matters that require the use of discretion and judgment. Pros and cons of exempt employees Although the employee classification of "exempt" may seem ideal for some employers, that is not the case for everyone.
For the employer Since exempt employees cannot earn overtime pay, Gerlick said that the primary benefit of hiring an exempt employee is the ability to demand a certain level of performance or output while maintaining a fixed budget.
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