Definition of Exempt Employees:
Simply put, an exempt employee is someone exempt from receiving overtime pay.
It is a category of employees who do not qualify for minimum wage or overtime pay as guaranteed by Fair Labor Standard Act (FLSA). Exempt employees are paid a salary instead of hourly wages and their work is professional in nature. Employers sometimes have an employee benefit package or provide year-end bonuses to compensate for the extra or overtime work that exempt employees do.
In contrast to exempt employees, non-exempt employees receive overtime pay whenever they work over 40 hours per week, in addition to their hourly wages.
How do you classify Exempt employees?
The requirements of exempt employees are as follows:
- They are paid salary instead of an hourly rate. They receive a monthly basic pay higher than FLSA threshold, irrespective of the number of hours worked in a week.
- Earning threshold for exempt employees changes every year. As of 2020, employees must earn at least $684 or $35,568 per year. Employees receiving less than this are considered non-exempt employees.
- The employee must also perform the job duties mentioned for each type of exempt employees, besides receiving a salary and earning threshold.
Types of Exempt Employees:
- Manage the department, enterprise, or subdivision of the enterprise.
- Regulate or supervise the work of two or more full time employees or four part time employees.
- Must have an authority and have a say in hiring, firing, promoting or delegating tasks to employees.
- Administrative exemption:
- Must perform office or non-manual work related to the business, management or general business operations for the employers or their customers.
- Should be able to make decisions and use their own judgment without reporting to anyone.
- Perform a job that requires specialized education in that field to be able to judge and decide.
- Should hold a college or higher education degree in the particular field to do the job
- Applies to employees who use their inventiveness, creativity, and artistic talent for the job.
- Employees who receive high compensation:
- They must fall under executive, administrative, or professional exemption
- Receive an annual salary of $107, 432 or higher. (January 2020)
- Skilled worker in the computer field performing the job or systems analyst, programmer, computer engineer.
Outside sales Exemption:
- Must work away from office location or place of business.
- Main responsibilities include obtaining orders, contracts and making sales.