In the United States and other countries, employees are broken into two categories: exempt and nonexempt. If you are currently employed, do you know which category you belong to? What is the difference between the two anyway? In this article, we will explore the difference between exempt and nonexempt employees.
|Exempt Employees||Nonexempt Employees|
|Employees who are not entitled to overtime pay||Employees who are entitled to overtime pay|
|Receive a monthly or annual salary; consistent pay (salary) + more than $455/week or $23,600/year||Receive an hourly wage (at least the federal minimum wage); inconsistent pay (hourly) + less than $455/week or $23,600/year|
|Paid at least $23,600 per year||Paid less than $23,600 per year|
|Scope of work can be executive, professional, or administrative (e.g. teachers, musicians, lawyers, nurses)||Scope of work is not executive, professional or administrative in nature (e.g. customer service associates, janitors, waiters)|
Exempt employees are those employees who are not entitled to overtime pay and the federal minimum wage.
According to the Fair Labor Standards Act (FLSA), an employee is classified as an exempt employee if:
- He or she is paid $23,600 a year or more
- He or she is paid a monthly or annual salary and not an hourly wage
- He or she is a white collar employee performing any of the following tasks:
- Administrative – Refers to office jobs or nonmanual work higher than the regular clerical position (e.g. human resources, compensation and benefits or payroll, public relations).
- Executive – Refers to supervisory or management roles, or any position that makes the employee directly involved in the other workers’ employment status (e.g. recruitment, hiring, termination, job assignments, etc.)
- Professional scope – Any work that requires a degree, specialized training or education, or creative in nature (e.g. nurses, doctors, lawyers, architects, educators, corporate trainers, musicians, writers, etc.)
Although the employers are not required to pay their exempt employees overtime pay, some companies still choose to do so, while others may create a benefits package instead.
On the other hand, nonexempt employees are those employees who are entitled to overtime pay and the minimum wage mandated by the federal government.
Based on the FLSA rules, an employee belongs to the nonexempt category if:
- He or she receives less than $455 per week or $23,600 per year
- He or she is paid an hourly wage
- His or her scope of duties is not executive, administrative, or professional in nature (e.g. customer service representatives, waiters, clerks, cashiers, cleaning and maintenance staff, etc.).
If a nonexempt employee works more than forty hours a week, he is entitled to receive overtime pay which is typically one and a half times his regular hourly pay. This means that if he worked 50 hours, for instance, he should receive his regular pay for the first 40 hours and then another 10 hours using the overtime pay calculation.
Exempt vs Nonexempt Employees
What, then, is the difference between exempt and nonexempt employees?
Exempt employees are those who do not receive the federal minimum wage and are not entitled to receive overtime pay. These employees earn at least $23,600, receive a monthly or annual salary, and are white collar employees (administrative, executive, or professional).
Nonexempt employees, on the contrary, are those who receive at least the minimum wage and are entitled to overtime pay which is at least one and a half times their regular hourly pay. These employees earn less than $23,600 a year, are paid by the hour, and have jobs that are not administrative, executive, or professional in nature.