Exempt vs Non-Exempt Employees? That Is the Question.
Exempt vs Non-Exempt Employees? That Is the Question.

Exempt vs Non-Exempt Employees? That Is the Question.

The hot topic of discussion around the water cooler in workplaces today is the new DOL overtime changes. While you may have heard about what’s required, 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

Update from the Department of Labor

The Department of Labor (DOL) recently announced new federal overtime provisions of the Fair Labor Standards Act (FLSA). See below for the new rule updates:

  • “White collar” exemptions increase from $455/week to $684/week.
  • The total annual compensation requirement for highly compensated employees increases from $100,000 to $107,432.
  • Employers can use bonuses and incentive pay (including commissions) to satisfy up to 10% of the standard salary level.

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.

Exempt Employees

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:

  1. Is paid at least $23,600 per year (or $455 per week). This amount will change to $35,568 per year (or $684 per week) beginning on January 1, 2020.
  2. Is paid on a salary basis.
  3. 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

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.


EEO-1 Reporting Update

In late April 2019, a federal judge announced that employers covered by EEO-1 reporting requirements must now submit 2017 & 2018 pay data to the EEOC by September 30, 2019. This compliance update means that covered employers must report total hours worked for employees by race, ethnicity and gender within 12 proposed pay bands.

On October 29, 2019, the court ordered the EEOC to “take all steps necessary to complete the EEO-1 Component 2 data collection for calendar years 2017 and 2018 by January 31, 2020.” Due to this order, the data collection system will remain open indefinitely. Employers that have not yet filed should do so as soon as possible.

Paycor will continue to monitor the EEOC for a more defined deadline and will communicate more information once it is made available.

Properly classifying employees and accurately capturing their time is essential to maintaining compliance with new EEO-1 reporting requirements. Paycor’s Time and Attendance software offers employers multiple forms of time-entry (mobile, web, kiosk, clock) so employees can clock in and out from anywhere, anytime. And with mobile punching, employers can verify locations and set precise coordinates to ensure employees are punching in and out from the desired work location. With one location to track and monitor hours worked, employers have instant access to the data they need to accurately report Component 2 data on the EEO-1 survey.

To learn more about the impact new EEO-1 reporting updates could have on your organization, click here.


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 On-Demand 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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