What are exempt employee statuses?

Exempt and non-exempt employee statuses are taken from the FLSA 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 $58,656 a year and are generally skilled professionals working in white-collar positions. Doctors, lawyers, accountants, HR managers, and engineers, for instance, qualify as exempt.

What are non-exempt employee statuses?

Non-exempt employees, in contrast, earn hourly wages. The FLSA establishes protections for non-exempt employees to ensure they receive fair compensation for their work. Non-exempt employees must receive minimum wages that align with the federal or state wage laws. In addition, some jurisdictions require meal and rest breaks, further supporting fair labor conditions for non-exempt workers.

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.

Can a person hold both exempt and non-exempt roles?

Yes, a person can hold both exempt and non-exempt roles within the same organization, but it requires careful planning to stay compliant with the FLSA. This typically happens when someone has two distinct sets of responsibilities—one that qualifies as exempt and another that falls under non-exempt criteria. For instance, someone might have an administrative role that’s exempt while also performing hourly, non-exempt tasks like customer service.

What laws impact exempt and non-exempt employee statuses?

The Fair Labor Standards Act is the key law that defines exempt and non-exempt employee classifications in the United States. It establishes rules around minimum wage, overtime pay, and recordkeeping. Employers are required to follow these guidelines to ensure fair pay practices and avoid compliance issues.

Are taxes handled differently for exempt and non-exempt employee statuses?

No, there’s no difference in how taxes are handled for exempt and non-exempt employees. Both classifications require federal, state, and local taxes to be withheld from paychecks. Employers deduct income taxes, Social Security, and Medicare contributions for everyone on the payroll.

Are independent contractors exempt or non-exempt?

Independent contractors aren’t classified as exempt or non-exempt because they aren’t employees. They’re self-employed professionals who provide services to businesses under a contract. That means they don’t qualify for overtime pay, minimum wage protections, or employee benefits under the FLSA.