Understanding Employee Classifications: Non-Exempt, Non-Exempt Salaried, and Exempt
Navigating the ins and outs of employee classifications under the Federal Fair Labor Standards Act (FLSA) can be tricky. But don't worry—I've got you covered! Here's a quick and simple breakdown of what you need to know to keep your business compliant and avoid costly mistakes.
Non-Exempt Employees
What’s a Non-Exempt Employee?
These are your hourly workers or salaried workers who still qualify for overtime. The big thing to remember is that they’re entitled to at least the minimum wage and overtime pay at 1.5 times their regular rate for any hours over 40 in a week.
Key Points:
Hourly Pay: Most non-exempt employees are paid by the hour but can be salaried, too.
Overtime: If they work more than 40 hours in a week, they must get overtime pay.
Minimum Wage: Ensure they earn at least the federal minimum wage for every hour worked.
Non-Exempt Salaried Employees
What’s the Deal with Non-Exempt Salaried Employees?
These employees are still non-exempt, meaning they qualify for overtime, but they’re paid a salary instead of an hourly wage.
Key Points:
Pay Calculation: Their salary needs to be high enough to cover at least the minimum wage for all the hours they work, including overtime for any hours over 40 in a week.
Record-Keeping: You’ll need to keep detailed records of all their hours worked, including time spent on rest breaks or training.
Exempt Employees
Who Are Exempt Employees?
Exempt employees are usually those in executive, administrative, or professional roles. They’re not subject to the FLSA’s minimum wage or overtime requirements.
Key Points:
Salary Level Test: As of July 1, 2024, these employees must earn at least $844 weekly. Heads up—this will increase to $1,128 weekly on January 1, 2025.
Salary Basis Test: They must receive their full salary for any week they work, no matter how many hours they put in.
Duties Test: Their main job duties must fit certain criteria related to executive, administrative, or professional tasks.
Don’t Forget State Laws and Compliance!
State-Specific Rules:
Some states have rules for exemptions that can be even stricter than federal law. Be sure to check what applies in your state.
Accurate Record-Keeping:
For non-exempt employees, keeping precise records of hours worked is crucial. It’s not just about compliance—it’s about protecting your business from potential legal headaches.
Final Thoughts
Classifying your employees correctly is essential to avoid legal trouble and to ensure compliance with federal and state laws. Keep those records accurate and understand the FLSA requirements, and you’ll be on solid ground when it comes to managing payroll and staying out of hot water.
