Exempt Employee

What is an exempt employee? 

According to the Fair Labor Standards Act (FLSA), exempt employees are paid a set monthly or annual salary instead of hourly pay. This means that these employees may work as much or as little as they need to fulfill the duties of their position. They’re typically salaried employees.

They are not required to work a minimum number of hours as long as they can adequately complete their duties. Exempt employees do not typically receive overtime pay. They also must be paid a certain minimum salary.

Exempt employees can often choose to only work on certain days of the week, which can improve their work-life balance and allow them to choose to work primarily during the days and times they are most productive. 

What does exempt mean?

In this context, exempt means that employees are exempt from adhering to a 40-hour work week and receiving hourly pay based on working a certain number of hours each week.

Instead, employees’ weekly, biweekly, or monthly pay is based on a set monthly or annual salary that does not change based on the number of hours an exempt employee works.

Exempt vs. non-exempt employees 

The main difference between exempt and non-exempt employees is their differing overtime eligibility. 

Non-exempt employees receive overtime pay at one-and-one-half times their typical hourly pay for each hour worked beyond 40 in any given week. They must also be paid the minimum wage. Employees are also considered non-exempt until they meet the requirements for exemption. 

Exempt employees are not entitled to overtime, which means they can often work more than the standard 40-hours work week. 

Exemption from overtime pay requirements 

Because exempt employees may work as many or as few hours as they choose to each week, employers are generally not required to provide them with extra overtime pay in the same way that they must provide overtime to hourly employees. 

These employees are typically categorized as executive, administrative, professional, or outside sales. However, it is important to note that some states have different classification criteria based on their state laws. 

FLSA exclusions

Here are some of the most important considerations when determining whether a position’s FLSA status is best classified as exempt or non-exempt:

1. Salary level test

Currently, employers must pay employees a salary of at least $684 per week to be considered exempt. This may change when the Department of Labor publishes a proposed rule which may increase the minimum salary requirement.

2. Salary basis test

Employees paid a monthly or annual salary are typically guaranteed a minimum income each pay period as long as they work at some point during that time. Non-exempt employees who receive hourly pay will not be paid during a pay period they do not work. 

3. Duties test 

The type of work an employee typically performs is also a key factor in determining whether they are classified as exempt. Most leadership and professional roles are generally considered salaried positions in employee classification. Duties that are likely to be classified as exempt include: 

• Executive duties 
• Professional duties 
• Administrative duties

HR tip

Certain states have their own salary and duties tests to determine if an employee is exempt from overtime under state laws. Check your state rules to ensure you are referring to the correct classification criteria for your state. 

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