What is the Difference Between Non-Exempt, Exempt, Salary and Hourly?
June 29, 2021
The United States department of Labor created the Fair Labor Standards Act (FSLA) which establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees at the state and federal level. When in a work setting, companies have a few different types of employees. You have employees that are exempt and employees that are non-exempt, but you also have employees that are paid salaries and others that are paid by the hour. If you do not know the difference between non-exempt vs exempt employees and Salary vs hourly employees- Don’t worry, we have you covered. Keep reading as we go in depth about the new standards that the US Department of labor has set in place for the workforce.
What does it mean for an employee to be non-exempt?
The Federal over-time provisions are a part of the Fair Labor Standard Act (FSLA). It states that unless employees are counted as exempt, employees covered by the act must receive over-time pay for any hours worked beyond the max 40 hours worked in a work week. The rate of pay must be no less than time and one-half of the regular rate of pay. However, this does not apply to time worked on weekends and holidays. Non-exempt employees are typically paid by the hour, and are entitled to overtime pay for any hours worked after 40 hours in a work week.
What does it mean for an employee to be exempt?
Usually, exempt employees are those who are subject to annual salaries and not subject to overtime or time tracking. To qualify as an exempt employee, they must meet 3 criteria,
- Be paid a minimum of $35,568 per year or $684 a week.
- Be paid on a salary basis.
- Their job must involve exempt job duties. Exempt employees generally perform relatively high-level duties (white collar workers), usually highly trained professionals who typically work in an office setting.
The difference between hourly and salary
When an employer declares you as a salaried employee, you are paid the same reoccurring amount for as long as you hold the same position with your company, unless further negotiated. There are pros and cons to being a salaried employee. A pro may be that the employee feels a sense of security because employers cannot cut their hours. A con however may be that salaried employees typically have more responsibilities and tasks that must be completed- even if that means the employee must work during the weekend and/or during non-working hours.
Hourly employees are paid based off the number of hours worked. If an employer decides to give an employee more hours, more than the 40-hour limit for a work week, they legally must pay the employee time and a half as overtime pay. Just like salaried jobs have pros and cons, so do jobs that get paid by the hour. If an employee is paid by the hour, they are not subject to taking their work home with them at the end of the day, whereas a salaried employee may be obligated to. This creates a better balance between personal/home life and work life. Employees have the ability to concentrate on family, hobbies, and even possibly a 2nd job. The negative side of this, however, is the employee is paid based off the number of hours worked with the risk of employers cutting their hours. The employee then becomes vulnerable and does not have the security that a salaried employee may receive. If a company goes through hard times, the hourly employee is typically the first to feel the impact.
The key takeaway from this blog is to understand the differences between Salaried vs Hourly employees and exempt vs non-exempt employees. There are not any laws regulating whether or not employees are salaried or hourly, the decision is solely based on the employer and what they see best fits their company. As long as rules and regulations are followed and requirements are met, it is up to the company to decide how to classify their employees.
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