Exempt vs. Non-Exempt Employees

There’s a lot of confusion about the difference between exempt and non-exempt employees.

Do you know how you’re classified and whether you’re entitled to any protections under the Fair Labor Standards Act (FLSA)? What the pros and cons of each of these categories are?

We’ll clear the fog for you, so next time you browse job listings, you’d know what these terms mean and how this classification affects you.

What’s the Difference Between an Exempt and Non-exempt Employee?

The Fair Labor Standards Act (FLSA) is a federal law that protects workers by guaranteeing them certain rights, including minimum wage and overtime pay. It also prohibits child labor and requires employers to keep accurate records of hours worked.

The FLSA exempts certain employees from its protections, such as executives and administrative employees (also known as “white collar” workers). However, if the employee is not exempt under one of these categories, they are considered non-exempt employees and entitled to FLSA protections.

How Do You Determine if an Employee Is Exempt or Nonexempt?

To qualify for the FLSA exemption, an employee must meet all of the following criteria:

• Must be paid on a salary basis. This means that the employee must receive a set amount each week, regardless of how many hours they work.
• The employee must be paid at least $684 per week, which is $35,568 annually. This salary level requirement took effect on January 1, 2020, and is set to remain the same in 2022.
• The employee must be exempt under the duties test. This means that their job duties fall into one of three exempt categories: executive, administrative, or professional.

Employees who do not meet all of these criteria are non-exempt employees and are entitled to minimum wage and overtime protections.

Effective January 30, 2021, non-exempt employees must be paid at least $15 an hour, or $10.50 an hour if they are tipped workers. They are also entitled to overtime pay for any hours worked over 40 in a week.

Note, however, that the FLSA determines only federal labor laws. Each state has its own state labor laws, which affect exempt employee status, minimum wage, and overtime requirements. On January 1, 2022, 22 states increased their minimum wages.

Exempt vs Non-exempt Employees: Pros and Cons

There are a few pros and cons to being exempt versus non-exempt.

As an exempt employee, you may be more likely to get promoted or earn higher wages because they are exempt from the overtime laws. On the other hand, as an exempt employee, you will not receive extra pay for working over 40 hours in a week. You also may have to work longer hours than a nonexempt employee to complete your job duties.

In contrast, non-exempt employees are entitled to overtime pay and additional benefits. However, they may not be able to earn as much money as exempt employees, and they may have less opportunity for career advancement.

Since salaried employees are typically exempt while hourly workers are non-exempt, the salary vs. hourly pay debate presents some additional benefits and drawbacks relevant to our discussion.

Bottom Line: Is It Better to Be an Exempt or Non-exempt Employee?

That’s difficult to answer, as it depends on individual circumstances. However, exempt employees typically have more job security and may be able to earn more money than non-exempt employees. On the other hand, non-exempt employees are entitled to certain benefits that exempt employees are not, such as eligibility for overtime.

Ultimately, it is up to you whether exempt or non-exempt employment is right for your situation.