Exempt vs Non Exempt Employees? That Is the Question.
The hot topic of discussion around the water cooler in workplaces today is the proposed DOL overtime changes. While you may have heard about potential changes to the law, do you truly understand how it could affect your employees and your business?
All employers are required to classify jobs as either exempt or non-exempt. The first place to begin is to determine whether you are classifying your employees properly. Misclassifying employees can cause confusion for both workers and employers—and not knowing the difference between these two categories could cost you a lot of money.
Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) mandates that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay for working more than 40 hours per week. However, the FLSA provides an exemption from both minimum wage and overtime pay for individuals who are employed as bona fide executive, administrative, professional, outside sales, certain highly compensated employees and certain computer employees. There are also exemptions for specific types of workers in unique industries.
Update: On November 22, a U.S. District ruled in favor of an injunction blocking the final overtime rules from being implemented on December 1, 2016. At this time, we are awaiting more information on updates to the rule and the final implementation date.
If you have implemented changes already, we recommend businesses not change any plans, pay structures, or policies that have been updated.
Generally, exempt employees are those who are paid an annual salary and not subject to overtime hours or time tracking. To qualify for exemption, employees must typically meet the following three tests:
* Is paid at least $23,600 per year (or $455 per week).
* Is paid on a salary basis.
* Performs exempt job duties. Exempt employees generally perform relatively high-level duties regardless of job title. These employees are referred to as “white collar” workers because they are highly skilled and formally trained professionals who typically perform job duties in an office setting. Many white collar workers either provide services to clients or businesses, corporations or government agencies.
Note: Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the DOL’s regulations. Check out the DOL’s Fair Pay Fact Sheets for more detailed information about the specific duties that must be performed in order to meet the requirements of the white collar exemptions.
Non-exempt employees are generally paid by the hour, rather than on a salary basis, and those working above 40 hours per week are entitled to time and one-half of their regular pay rate for each hour of overtime worked. Use our calculator to calculate the overtime pay for your employees.
As many companies have learned the hard way, improperly classifying employees as exempt can lead to serious fines from the Department of Labor. Don’t make the same mistake. Paycor’s HR Support Center gives you access to a knowledgebase of HR tips, alerts, checklists and templates to help you reduce your risk of non-compliance. In addition, HR Support Center On-Demand lets you call or email HR professionals who can guide you and answer your specific questions. Reach out to us to learn more.
This content is intended for educational purposes only and should not be considered legal advice.
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