Are Your Exempt Employees Actually Non-Exempt?

Which employees are exempt versus non-exempt is an important distinction in any organization. Generally speaking, non-exempt employees are paid hourly while exempt employees are paid a salary, not hourly.

The Reality: Almost Every Employee is Non-Exempt

It’s a hard reality to accept sometimes, but almost every employee is non-exempt. In any organization, you have people doing the work and you have people telling people what to do. To be successful you need to have more people doing the work than telling people which work to do.

Exempt versus non-exempt matters to an HR department because non-exempt employees are entitled to more. For instance, non-exempt employees are entitled to overtime pay, which is one of the most pressing issues. They are also entitled to lunch breaks, etc. depending on the laws of each individual state.

Two Tests to Determine Exempt Status

To determine whether an employee is exempt versus non-exempt, there are two criteria to look at.

The first test is related to the employee’s income. In order to pass the exempt test, an employee needs to be earning the equivalent of twice the state or the federal level (whichever is higher) minimum wage.

There is also the duties test. There are seven white collar exemptions, according to the Department of Labor, including outside sales or management. An employee has to be involved in exempt level duties in 50 or more percent of the time to be an exempt level employee.

It’s a Hard Transition from Exempt to Non-Exempt

In many ways, being non-exempt is in the favor of an employee. They receive benefits such as overtime pay commensurate with the work they are providing. However, discovering that your exempt employees are actually non-exempt and having to make that transition can be painful – for the employees and company morale as a whole. In these circumstances, the best approach is honest and transparent conversations with your staff, highlighting the benefits of non-exempt status. If you have any human resources questions about our services, we would be happy to chat! Please don’t hesitate to reach out.