There are two types of employees in the US—exempt and non-exempt. Failure to correctly classify employees can lead to serious compliance issues and fines for a business.
If you’re struggling to understand the difference between exempt and non-exempt employees, you’ve come to the right place.
This guide contains everything you need to know about classifying your employees so you can pay them properly and remain compliant.
What Are Exempt and Non-Exempt Employees?
All employers must classify employees as either exempt or non-exempt. The classification typically depends on:
How much an employee is paid
How an employee is paid (salary vs. hourly wages)
The type of work an employee does
The term “exempt” refers to overtime, and it’s the easiest way to understand the difference between these two classifications. Exempt employees are paid a salary and not entitled to overtime. Non-exempt employees are paid hourly wages and entitled to overtime pay.
The Basics of Exempt vs. Non-Exempt Employees
While the basic concepts of exempt and non-exempt employees are straightforward, you need to understand many other factors. The following section will break down the core components of exempt vs. non-exempt employees.
Fair Labor Standards Act (FLSA)
The Fair Labor Standards Act (FLSA) is a US labor law originally published in 1938. It defines the federal minimum wage, overtime rules, child labor rules, and other labor standards to prot… Read More