Understanding the difference between exempt and non-exempt
What is an Exempt employee?
Exempt employees do not receive overtime pay, nor do they qualify for minimum wages
as per the rules set up by the
Fair Labor Standards Act - FLSA.
Exempt employees get
a fixed salary every month, whether they work more than hours set up per working day
or even take time off. They need to complete a set amount of work. The working hours
for full-time, exempt employees are considered to be 40 hours per week.
What qualifies as an Exempt employee?
The exempt employees’ duties must consist of executive, administrative,
computer-related, and professional positions.
The employee must get a salary that is twice the state minimum wage for
The minimum salary requirement for an exempt employee in California under the
is $49920 for an employer who employs 25 or fewer
employees and $54080 for an employer who employs more than 25 employees.
An exempt employee must be paid not less than
per week (or $23660 annually)
to $684 per week (or $35568 annually).
These exemptions apply to specific jobs like:
- Commissioned employees
- Administrative employees like employees in human resources, legal, finance, public relations, accounting, and other roles.
- Professionals employees like teachers, dentists, architects, nurses, lawyers, engineers, software professionals, Physicians, and surgeons.
- Executive employees like the CEO, managers, supervisors, and other people who play a vital role in decision making for the organization.
- Outside salespersons
- Truck drivers
- Union employees
- Agricultural workers
- Babysitters and domestic companions
What is a Non-Exempt Employee?
Non-exempt employees, as per rules set by the Fair Labor Standards Act - FLSA are
eligible for overtime pay and state or federal minimum wage for every hour worked.
A non-exempt employee must earn the least federal minimum wage of $7.25 per hour.
Their overtime pay is at least one and a half times their regular wage for any hours
worked beyond 40 hours each week.
For example, if an employee has worked for 50 hours a week and earns $10 per hour,
then for 40 hours, the employee will get $10 per hour, and he will get $15 for the
next 10 hours, which are considered overtime.
Who are Non-Exempt employees?
- They are usually supervised and therefore have minimal opportunity for independent judgment.
Their work does not involve decision making.
- They do not have administrative or executive positions.
Examples of Non-Exempt employees are:
Contractors, Freelancers, Carpenters, Electricians, Retail associates, Fast food
Employees mostly working from sectors like construction, maintenance,
assembly line workers, and other work that involves physical labor.
What is the difference between exempt and non-exempt employees?
The primary difference between exempt and non-exempt employees is the eligibility
for overtime pay or compensation they receive.
Exempt employees have to devote a certain number of hours per week to the
assigned tasks. It may require them to work for 35 hours per week or 60
hours per week. Their salary will remain the same; even if they are putting
up extra hours of work, they will not get paid for it.
On the other hand, non-exempt employees will earn for each extra hour they have
worked beyond the fixed hours, and they will also get one and a half times
more than their regular wage for the extra hours worked.
Exempt employees get compensation for the projects they
complete and not for the time taken to complete them.
Non-exempt are usually compensated for the time they work and
not the jobs they complete.
The exempt employees have a reliable income as they know that they
will earn a fixed salary every month no matter how many hours they have worked.
The income for non-exempt employees is unreliable as they may not always
know how many hours they will work in the coming week; it mostly depends
on the availability of work and projects.
Exempt employees do not get protection under the FLSA regulations.
Non-exempt employees receive protection under the FLSA regulations for
receiving the minimum wages and the right to be paid overtime at a
Business impact on an Exempt employee vs. Non-Exempt employee:
If a business is closed for a certain period due to natural disasters or like the
current pandemic COVID-19, the impact will be different in both cases.
If the non-exempt employees have not put in any working hours or have not worked on
any tasks, then they are not eligible for any kind of pay. But they are eligible for
the payment if they are remote working and record task and time using
As far as salary for exempt employees is concerned, they will receive their
paycheck regularly, regardless of the number of hours they have worked.
To be an Exempt or Non-Exempt employee?
Exempt employees will receive full salary irrespective of the number of hours
worked and the quantity and quality of work performed. Non-exempt employees are
paid for every hour they have worked, so their time spent on tasks is crucial
and needs to be
A non-exempt employee can enjoy the compensation for the additional work hours,
although this may be at a lower rate than an exempt employee. In contrast, exempt
employees will receive a full paycheck irrespective of the time he takes off or
leaves early from his work occasionally.
In case of any crisis, exempt employees can work remotely or put in fewer
hours but still, they will receive a full paycheck. For non-exempt employees,
if they are required to be physically present for their job and unable to
perform their tasks, they are not entitled to receive any compensation.
Exempt workers can receive benefits like time off, healthcare coverage after
retirement, which non-exempt employees cannot get. However, both exempt and
non-exempt employees are eligible for government employment benefits.
As far as taxes are concerned, there is no difference in how both employees
are taxed. All their pay is earned income, whether it is earned on an
hourly basis or monthly basis.
The guidelines vary from state to state, so
if you pay employees in different states, be sure to check regulations for each state.