What are exempt and non-exempt employee statuses?

Exempt and non-exempt employee statuses are taken from the FLSA (Fair Labor Standards Act) employee classification system.

Exempt employees earn a salary, not an hourly wage. They are exempt from receiving overtime pay and cannot qualify to receive it. Exempt employees make a minimum of $35,568 a year and are generally skilled professionals working in white-collar positions. Doctors, lawyers, accountants, HR managers, and engineers, for instance, qualify as exempt. The different types of exemptions include:

• Outside sales
• Highly-compensated employees
• Computer
• Professional
• Administrative
• Executive

Non-exempt employees, in contrast, earn hourly wages. Non-exempt employees must receive minimum wages that align with the federal or state wage laws. Unlike exempt employees, non-exempt employees qualify to receive overtime pay when they work over 40 hours a week. Cashiers, bookkeepers, and skilled tradesmen, such as plumbers and electricians, are typically non-exempt.

Why should HR leaders care about exempt and non-exempt employee status?

Understanding exempt and non-exempt employee statuses enables HR leaders to ensure that people receive compensation that accurately reflects their classification. Paying people in adherence to the law helps employers avoid lawsuits while also contributing to fair treatment of employees. Ultimately, properly integrating exempt and non-exempt employee status policies shows people that their company takes them seriously, setting the foundation for an engaged, productive workforce.

How can HR leaders effectively implement exempt and non-exempt employee status laws?

HR leaders can incorporate the following practices to create an organized and effective system for managing exempt and non-exempt employee statuses: 

• Communicate systematically with managers. To ensure people receive proper payment according to their status, department and line managers should notify HR leaders regarding promotions or changes in an employee’s compensation plan. Regular collaboration keeps the lines of communication open so HR leaders can be aware of crucial changes or new information. 
• Stay on top of the rules. Knowing the federal and state laws concerning exempt and nonexempt employee status is essential. However, the difference between exempt and nonexempt employees is not always clear: The classification doesn’t just depend on the person’s role and level of compensation, but also on the content of work. Thus, if necessary, HR can consult with a professional compensation attorney to clarify complex employment issues.   
• Make the information accessible to employees. Include a section in the employee handbook that explains work schedule expectations. Outlining detailed, straightforward policies concerning overtime, breaks, and WFH can help clarify any confusion. In addition,  personnel should sign a document during onboarding that says they’ll adhere to the employment laws and conditions. 

Why should exempt and non-exempt employee statuses be a part of modern HR strategy?

Knowing the ins and outs of exempt and non-exempt employee statuses enables employers and employees to adhere to the law. By seamlessly incorporating exempt and non-exempt employee policies, HR leaders can contribute to a smooth employee experience while also helping employers maintain a clean slate.