Difference Between Exempt vs Non-Exempt Explained

The Fair Labor Standards Act (FLSA) Requirements

The Fair Labor Standards Act (FLSA) protects non-exempt employees from getting paid the minimum wage and at least one and a half times overtime if worked more than 40 hours, the compensable time, to maintain proper recordkeeping, and the youth at a Federal and State level.

Main Difference Between Exempt & Non-Exempt

Being exempt is more similar to being an independent contractor because your boss isn’t required to pay for every hour worked. This means they’ll probably let you waste time because if you have to work at night, it won’t be at their expense.

Being non-exempt means you’re probably getting paid hourly so you’ll have more supervision because each hour you’re working is coming from the business’ pockets. They’ll want to make sure each hour was well spent.

What It Means to Be an Exempt Employee

Exempt means you don’t get paid for any overtime, you get paid salary and not hourly, and you’re not required to get paid minimum wage.

Normally, only high-level positions are exempt like executives, supervisors/managers, professionals, and most sales positions.

Requirements for exempt workers in private sectors and Federal, State, and local governments

What It Means to Be a Non-Exempt Employee

Non-exempt means your employer has to meet the FLSA requirements. That means you have to get paid the hourly minimum wage at a federal level, paid overtime for at least one-and-a-half times if worked more than 40 hours.

Requirements for non-exempt workers in private sectors and Federal, State, and local governments

Taxes & Unemployment Requirements are the Same

Regardless of whether you classify your employees as exempt or non-exempt, you’ll have to pay the same employment, unemployment, and Social Security taxes for them.

Income is income in this situation, whether it’s hourly or salary it doesn’t matter.

Go to the Department of Labor for your state and see what the tax and unemployment requirements are.

How to Think of Overtime

We already know that for exempt employees you’re not required to pay overtime, so it doesn’t matter as much to you, the boss if they go over it.

For non-exempt, you’ll need to supervise your employees and make sure each hour worked is as valuable as possible.