![]() Classifying your employees can feel like an easy part of managing your team. Choosing an employee’s department, how they get paid, their job title, and whether they’re full-time or part-time are just a few examples of how businesses commonly classify their employees. Seems pretty simple, right? Well, some classifications are not so easy. One of the trickiest employee classifications is determining whether or not an employee is considered to be exempt or non-exempt: a critical sorting that helps establish how an employee is paid and whether they’re eligible for overtime pay. Some people may shrug and think, “That’s easy. If they are paid hourly, they’re non-exempt; if they’re paid salary, they’re exempt.” But the Fair Labor Standards Act (FLSA), the labor law that governs several aspects of compensation such as minimum wage, overtime pay, and recordkeeping, dictates that there’s much more to be considered when categorizing an employee as exempt and non-exempt. What’s the Difference Between Exempt and Non-exempt?![]() Before we get to the nitty-gritty, let’s first go over the difference between an exempt and non-exempt employee: An exempt employee is an employee that is “exempt” from the FLSA, meaning exempt employees are not entitled to overtime pay. There are a few provisions that come along with being classified as an exempt employee. First, the minimum salary to be paid to an employee to be considered exempt is at least $684 a week, or $35,568 per year (as of January 2020). Some states, like New York, Maine, Colorado, Alaska, California, and Washington, establish their own compensation criteria for exempt classification. Exempt employees also receive a fixed salary, meaning that their base salary won’t change due to the quantity or quality of the work they perform. It’s not just how much you make, though; it also matters what kind of job functions you perform. The FLSA outlines qualifiers for exemption from both minimum wage and overtime pay for employees who fall under specific “exemptions.” These exemptions include Executive Exemption, Administrative Exemption, Professional Exemption, Computer Employee Exemption, and Outside Sales Exemption. On the other hand, a non-exempt employee is an employee who is “not exempt” from the FLSA and therefore is eligible to receive overtime pay. These employees typically perform more technical or manual duties, such as retail, mechanical, or clerical duties, as defined by the FLSA. Non-exempt employees must be paid at 1.5 the employee’s regular rate of pay if the employee works more than 40 hours in a workweek, under federal law. To make things even more intricate, the FLSA has additional specific provisions when it comes to Highly Compensated Employees, Blue Collar Workers, Police, Firefighters, Paramedics, and Other First Responders, and Collective Bargaining Agreements. The criteria to establish whether an employee is classified as exempt or non-exempt is robust, and the Department of Labor provides employers with guidance to help you determine if your employee is eligible for overtime pay. Proceed With Caution! Determining the Exempt or Non-Exempt Status of EmployeesIt’s important to keep a couple of facts in mind when classifying employees:
Implications of Misclassifying Employees as Exempt or Non-exemptThere are serious consequences to consider for misclassifying employees, which is a surprisingly common mistake many organizations make. Consequences for misclassification of employees can include:
Examples of Exempt and Non-Exempt EmployeesA few common examples of exempt employees may include:
Common examples of non-exempt employees may include:
Benefits Comparison for Employees and EmployersBoth exempt and non-exempt statuses have different benefits. For example, exempt employees tend to have more flexibility, more professional development opportunities, and the potential to earn higher wages. However, non-exempt employees benefit from their eligibility to receive overtime pay and are specifically compensated for the amount of time they work. For employers, there are similar benefits. Exempt employees give employers a more predictable payroll, and exempt employees bring the ability to take on more or different responsibilities based on business needs. Though your payroll expenses may vary more for non-exempt employees, you’re only paying employees for the hours they work. At the end of the day, employers can determine what type of employee is most suited to meet their business goals. ConclusionClassifying an employee as exempt or non-exempt is an integral business facet that business owners should not take lightly. The FLSA is a complex law, so you don’t have to make the decision alone. Reach out to us to discuss how our seasoned HR professionals can help guide you in the right direction. via EnformHR, LLC https://ift.tt/LBNyoZ2
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