Everything you need to know about exempt vs. non-exempt

You may have heard the terms exempt and non-exempt when it comes to employment status. What do they mean, and why should you care? We’ll answer these questions for you and cover the following topics:

• What is an exempt employee versus a non-exempt employee?

• What makes a job exempt?

• Is being exempt or non-exempt better?

Non-exempt employees compared to exempt employees

The FLSA (Fair Labor Standards Act) determines how employees are paid overtime and how they’re classified in terms of being “exempt” or “nonexempt.” According to the FLSA, a non-exempt employee is, by law, able to receive overtime pay. This means if you’re non-exempt, and you work over 40 hours a week, then you’ll receive overtime pay. Non-exempt employees are also subject to minimum wage laws, but are not limited to being hourly workers, they can be salaried employees.

On the flip side, exempt employees are not subject to FLSA rules. They don’t get paid overtime, and minimum wage is not applicable. Exempt employees perform certain duties that make them qualify as exempt employees. 

Per FLSA, an exempt employee must meet all three of the following criteria:

• Earn more than $23,600 per year

• Paid a salary

• Perform exempt job duties

What are exempt job duties?

There are three categories of activities that can have exempt job duties: executive, professional, and administrative.

What are some examples of exempt job duties?

• Executive. Job duties related to supervising staff, such as interviewing and hiring employees, assigning and scheduling work tasks, planning budgets, and overseeing the safety and security of the workplace.

• Professional. Many professions are considered exempt such as engineers, doctors, lawyers, teachers, and scientists. Some creative jobs are also considered performing professional duties which are exempt, like actors, musicians, and writers.

• Administrative. Tasks that are directly related to management or business operations, require independent judgment, and deal with significant business matters.

Any job duties that fall outside the above areas may be considered to be non-exempt tasks. You can find more details about the FLSA definitions on the FLSA.com website. 

What are the benefits of being exempt compared to being non-exempt?

The most obvious advantage of being an exempt employee is that you’re typically in a higher-level position and are paid more money. However, this depends entirely on the company you work for and the job you do. Some non-exempt employees can make just as much or more than exempt employees. 

Non-exempt employees are most often paid by the hour. This means their pay per week can vary depending on how many hours they work (regular and overtime). If you’re concerned about a consistent paycheck, then this can matter. A salaried (exempt) employee will generally get the same amount of money every month, regardless of how many hours they work. The downside for the exempt employee is that they don’t get overtime.

As a non-exempt employee, you need to be aware of what it means in terms of your job duties. As we covered before, certain job duties can make you fall into the exempt category. In general, if you’re required to perform a lot of management-level duties, then you may want to discuss your status with your employer. However, just because you do some management tasks, that doesn’t automatically make you an exempt employee. Every company is different. Getting paid overtime could outweigh the benefits of going exempt and being salaried.

What does exempt mean for taxes?

Whether you’re an exempt or non-exempt employee, your taxes will be the same because they’re based on what you’re paid. Non-exempt employees can pay a different amount of taxes per paycheck, depending on how many hours they worked. If you’re an exempt employee, then you get paid a salary and will most likely earn a consistent amount every month and therefore will pay the same amount of taxes each month. But, on an annual basis, it doesn’t make any difference.

How much money should you be making? Use our Salary Analyzer to figure out how much your skills are worth in the current market. 

Key takeaways 

1. It’s important to know if your job is exempt or non-exempt because it impacts how you get paid.

2. Non-exempt employees are entitled to minimum wage and overtime. Exempt employees are not.

3. Being exempt is not necessarily better than being non-exempt. You have to examine all the pluses and minuses of the job as a whole.