Exempt Vs Non-Exempt: Major Differences

exempt vs non exempt

Exempt and non-exempt: When you apply, you probably saw these phrases, observed them, and heard them used during conversations. But the distinction between the two groups is at best smooth when you are like most individuals. If you don’t know the difference between exempt and non-exempt, then we got your back using this article.

In this article, we will compare exempt vs non exempt using different characteristics. So, let us begin this guide of comparisons.

First Thing: Definition Of Exempt Employees

Before knowing any financial terminologies related to exempt employees, and non-exempt employees, we need to know what is an exempt employee mean. The phrase “exempt worker” refers to an employment type as defined in the Fair Work Standards Act (FLSA). Exempt workers are not paid extra hours, nor are they eligible for a minimum wage. #

If an employee is exempt, this mostly implies that he or she is exempt from the compensation for additional time. This comes from the fact that exempt personnel is not paid hourly pay and work in executive or professional positions. Exempt employees are typically awarded end-of-year bonuses to repay them for their labor and any overtime.

Definition Of Non-Exempt Employees

Non-exempt staff is employees entitled to receive the federal minimum wage and qualify for overtime compensation, which for each hour they work more than a typical 40 hours week is computed as one-and-half times their hourly rate. The Fair Labor Standards Act establishes these requirements (FLSA).

Non-exempt workers shall carry out orders with due diligence, without interfering with management choices. Therefore, non-exempt individuals tend to dominate employment sectors including construction, maintenance, and other professions involving physical work or repeating activities. Assembly staff is an excellent example of non-exempt staff.

Exempt Vs Non Exempt Employee: Distinctions & Qualifications

exempt vs non exempt employee

1. Exempt Employees

State to state requirements change, however, FLSA identifies exempt personnel as any exempt employment in these categories:

  • Professional
  • Administrative
  • Executive
  • Sales abroad
  • Computer-related

2. Non-Exempt Employees

Unlike exempt workers who often earn a fixed salary which is inevitably substantially more than the minimum wage workers, non-exempt employees are generally paid hourly pay. Although non-exempt employees are required to be paid one and a half times the time of their hourly wages, exempt employees have no legal right to claim overtime compensation for all hours worked for exceeding 40 hours, even if their working days are considerably longer than 40 hours.

Workers who earn less than $684 per day or who have a restricted scope for self-supervision may be deemed non-exempt under FLSA. The federal minimum hourly salary of $7.25 must be achieved by non-exempt employees under the FLSA; several States and certain municipalities, however, are subject to greater minimum wages than on the federal floor. The increased minimum wage in these cases exceeds the federal rate.

These were the major differences between exempt vs non exempt employees.

Non-Exempt Vs Exempt: Pros & Cons Of Exempt Status

The advantage that you are a freelance employee is that you know you have a consistent salary. Exempt workers tend to get hourly benefits and have access to extras such as pension benefits, including pensions, 401(k) plans and individual pension accounts (IRAs); benefits; healthcare plans sponsored by employers; and paid holidays and sick days.

The negative is primarily that there are no additional costs. You might labor for longer hours to meet an overloaded job portfolio without any access to extra refunds or a reduction in the stress caused by lengthy hours depending on your employer’s mentality.

Read Here: 21 Great Small Business Ideas to Start in 2021

Exempt Vs Non Exempt Jobs: Pros & Cons Of Non-Exempt Status

It is primarily up to an individual for the work-life balance whether it is desirable to be a non-exempt employer against an exempt. The major advantage of being a non-exempt employee is the opportunity to get extra hours of work compensation even if this is less than the rate paid to exempt staff.

exempt vs non exempt employee

An exempt employee, on the other, might sometimes get out of work early and still receive full payment. That said, non-exempt employees are also more covered than exempt employees by labor legislation such as FLSA. As exempt staff has a right to a complete wage check, they will get a full wage every workweek, albeit unanticipated situations such as a crisis demand exempt staff to operate remotely or in new arrangements.

In certain instances, non-exempt employees do not have the right to pay if they require their physical presence and cannot fulfill their responsibilities. Non-exempt employees must report their hours in any way. For example, if the store is being restructured or closed on a particular week, non-exempt employees who ply clothing at a retail shop will not get paid.

In the meantime, exempt retail managers may still be paid for remote tasks performed in the running of stores. The advantage of exempt workers is also higher, such as paid leave, healthcare coverage, and retirement plans participation. Both non-exempt and exempt employees, however, are equally entitled to public employment perks.

Case in point: Once retired, both types of employees are entitled to receive social security benefits. Both categories may get weekly unemployment compensation if they lose their jobs.

Exempt Vs Non Exempt Taxes

You have to pay the same employment, unemployment, and social security charges regardless of whether you designate your employees as exempt or not. Revenue is revenue in this scenario, regardless of whether it is hourly or hourly. Go to the Labor Department for your country and see the requirements of taxation and unemployment.

exempt vs non exempt

Apart from the different taxation rates we all fall into, the taxation of exempt and nonexempt employees doesn’t change. All compensation is ‘earned income,’ and hence taxed for wage earners based upon tax bracket, for both types of employees. Revenue is revenue; whether it is generated per hour or annual wages does not matter.

Exempt Vs Non Exempt Employee: Overtime Implications

The amount of hours required to perform their duties, irrespective of whether 35 or 55 hours per week would be required by the exempt personnel is typically assumed. Their pay does not alter depending on the actual time spent. For more than 40 hours a week, exempt staff are not paid extra; they are compensated for the work.

Non-exempt staff, however, have to be compensated extra time, if they have more than 40 hours worked each week, and businesses are therefore often required to stay free for non-exempt staff.

Exempt Vs Non Exempt Test

We have provided a test in this section to differentiate exempt from a non-exempt position:

exempt vs non exempt

1. Exempt Vs Non Exempt: FLSA Test

Businesses must categorize employees appropriately under the Fair Labor Standards Act as exempt or non-exempt. Two “tests” are available to assess if an individual is entitled to overtime wages.

  • The task test outlining the sort of work that is carried out
  • The wage test that imposes a ceiling on the wage

Employees who fulfill the duty and salary test requirements are deemed exempt from the compensation for additional time – or are employed.

2. Exempt Vs Non Exempt: Salary Basis Test

To establish whether an employee is exempt from overtime compensation, the next criterion should be satisfied. The new minimum requirements specified for 1 January 2020 must be met by the employees. Executive, administrative and professional staff should be paid for:

  • On a wage basis no less than $684 a week or $35,568 a year. (Note: not for out-of-home sales, instructors, legal professionals, or doctors)
  • No less than $684 a week or no less than $27.63 per hour for computer specialists

Many countries have introduced higher wage limits or have tested more specific tasks. In the case of dispute, it is typically advisable for employers to reach the levels that benefit the employee most.

3. Exempt Vs Non Exempt: Duties Test

The duty test identifies 3 main groups of workers who have been regarded as exempt from overtime pay.

a. Executive Exemption

These staffs have to:

  • A major responsibility for the administration of an enterprise or department in the firm
  • Direct work of or equivalent to a minimum of 2 or more additional full-time staff
  • Have the right to recruit or terminate other staff

b. Exemption From Administration

These staffs have to:

  • Do office or non-manual labor directly linked to the employer’s or employer’s clients’ management or general operations
  • Have the competence to make decisions

c. Learned Professional Exemption

These staff must:

  • Work towards increased understanding (defined as work that is predominantly intellectual and which includes work requiring the consistent exercise of discretion and judgment)
  • Science or learning work
  • Advanced graduation

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Exempt Vs Non Exempt: Which One Is Better

It’s up to you. Some employees would like non-exempt employment to make sure that they are paid each hour they work. The latitude with wage roles is preferable to others. In terms of things like casual time, the majority of employees without exemptions will be subject to stricter standards.

Exempt employees usually can spend appropriate periods around water coolers without the employer becoming angry, non-exempt staff times tend to be watched more tightly and scheduled breaks are permitted throughout working days only at particular times. In general, the exempt staff is paid more than non-exempt staff, as work should be done irrespective of the hours necessary for it.

If you have to stay late or come early, you are often expected to do that with exempt staff. Typically, non-exempt workers only work the specified number of hours. This essay intends to offer an introduction to this problem, although HR laws and rules may be quite complicated.

Exempt Vs Non-Exempt Checklist

Check the following section for exempt vs non-exempt checklist:

Exempt Employees

Non-Exempt Employees

Entitled to overtime?



Job duties

Executive, professional or administrative Anything else except executive, professional or administrative

What if they are full-time?

Still exempt if the pay is salaried and they are over the pay rate boundary

Still non-exempt if the pay is lower than the boundary

What if they are part-time? Still exempt if the pay is salaried

Still exempt if the pay is salaried, and they are over the pay rate boundary. If they do not meet one of the 3 tests, then considered non-exempt


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