Exempt vs. Non-Exempt Employees

It's important to understand the difference between exempt and non-exempt workers. These classifications determine how employees are paid and whether they are eligible for overtime pay.

Exempt Employee		Non-Exempt Employee
Definition: Exempt employees are typically salaried and are exempt from the Fair Labor Standards Act (FLSA) regulations regarding minimum wage and overtime pay. They are often classified as professionals, executives, or administrative employees. Exempt employees receive a fixed salary regardless of the number of hours worked and are not entitled to overtime pay.		Definition: Non-exempt employees are usually paid on an hourly basis and are entitled to minimum wage and overtime pay as per the FLSA. They often engage in tasks that do not fall under the exempt categories, such as manual or routine work. Non-exempt employees are compensated for every hour worked, and they receive overtime pay for hours worked beyond the standard 40 hours in a workweek.
Overtime Eligibility: Exempt employees are not eligible for overtime pay. This means that they are not entitled to receive extra compensation for hours worked beyond 40 hours in a workweek.		Overtime Eligibility: Non-exempt employees are eligible for overtime pay at a rate of at least 1.5 times their regular hourly rate for hours worked beyond 40 in a week.
Salary Basis: Exempt employees are typically paid on a salaried basis, meaning they receive a fixed salary regardless of the number of hours worked in a week.		Hourly or Salaried: Non-exempt employees can be paid on an hourly or salaried basis. If paid hourly, they must track their hours worked, including any overtime hours, and receive overtime pay accordingly.
Job Duties: Exempt status is primarily determined by the nature of an employee's job duties. To qualify as exempt, employees must generally perform certain types of work, such as executive, administrative, professional, or outside sales roles. These positions typically involve decision-making authority, management responsibilities, or specialized knowledge.		Job Duties: Non-exempt status typically applies to employees whose job duties are routine, clerical, or primarily involve manual work that does not fall within the exempt categories defined by the FLSA.
Record-Keeping: Exempt employees may not require the same level of detailed timekeeping as non-exempt employees.		Record-Keeping: Employers are generally required to maintain accurate records of hours worked for non-exempt employees to ensure compliance with wage and hour laws.
Pay Consistency: Exempt employees receive a consistent salary regardless of the number of hours worked, which simplifies payroll processing.		Pay Consistency: Non-exempt employees are usually paid based on hours worked, which requires tracking of hours worked and overtime.

The differences between exempt and non-exempt employees has an impact on your payroll:

1. Overtime Calculation: Payroll for non-exempt employees must include overtime calculations that follow the federal or state overtime laws. Pavillio makes these calculations for you to keep you in compliance.

2. Salary vs. Hourly: Payroll processing for exempt employees is generally simpler because they receive a fixed salary. Non-exempt employees require more detailed tracking of hours worked, especially if they are paid hourly.

3. Compliance: Employers must ensure compliance with overtime laws and regulations when processing payroll for non-exempt employees. Failure to do so can lead to wage and hour violations and legal issues. Pavillio Payroll is here to help with this.

Understanding the difference between exempt and non-exempt workers is important for both employers and employees. It not only determines the way individuals are compensated, but also influences the rights and benefits they are entitled to under labor laws. Employers should carefully classify their employees to ensure compliance with regulations, while employees should be aware of their classification to understand their rights in the workplace.