A workplace primarily has two types of employees- exempt employees and nonexempt employees. But what does it mean? What are they exempt from? It is time to dig into the background. The Fair Labor Standards Act (FLSA) is adapted by most companies and classifies each worker as either exempt or nonexempt. Both types of workers are recognized by laws regarding workplace safety. But, those who are exempt are not covered by FLSA rules whereas non-exempt workers are. The term ‘exempt’ refers to whether an employee could be exempt from earning overtime pay.
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Who is an Exempt Employee?
Anyone holding an exempt position is free from overtime terms, minimum payment, and other protections offered to nonexempt workers.
You must receive a periodic salary instead of an hourly wage for your position to be exempt. Exempt workers are not entitled to overtime pay. The executives are required to pay for at least forty hours’ worth of wages along with additional payment for overtime stay unless they are exempt under the FLSA regulations. Additionally, employers must pay close attention to both federal and state laws.
If you are exempt, you will not be entitled to overtime pay. It is up to your employer to decide whether you should get paid for the extra hours you put in your work. Your employer might choose to give you a bonus or benefits package instead of overtime pay.
If you are an exempt employee, you will be paid a periodic salary. You are also required to perform executive and administrative activities. Irrespective of the number of hours spent, exempt employees must complete their assigned tasks. As exempt employees do not receive an hourly wage, they are paid to get the job done.
What Happens When You Are Not Exempt?
If you are classified as a non-exempt employee, you are obligated to meet the rules and regulations of the FLSA. You will be paid the minimum wage set for each hour worked and then given overtime pay for any hours you worked after the allotted forty hours each. Apart from this feature only, there is no difference in how exempt and nonexempt employees are taxed.
How Will You Be Classified As An Exempt Employee?
You must meet a few general conditions to be designated and assigned as an exempt employee.
If you are an executive, you must have the duty of managing the department or sub-department of a company. You must direct and oversee the tasks of at least two employees and have the ability to recruit or dismiss subordinates. If you are administrative, you must perform duties that are related to the management and operations of the business. You must deal with customer relations and give your judgment in matters of significance.
You also qualify for exemption if you make sales, deal with contacts or work away from the office. If you are a professional, you must acquire knowledge of a particular field of study or specialize in a highly professional line such as engineering. You will also meet the criteria of exemption if you are employed as a computer analyst, programmer, and engineer or work in this field of study. Commission workers are also entitled to exemption. These include truck drivers, farmers, seamen, delivery employees, announcers, news editors and so on.
What Are Some of the Benefits of an Exempt Employee?
If you are an exempt employee, you will be compensated for the number of projects you complete than the amount of time you took to finish it. This is why you will receive a salary rather than an hourly wage. This allows you to acquire the minimum threshold for salaries. You will not need to worry about any hours you missed out as you will receive the same salary regardless.
And as you are compensated for the number of projects you do and not the time it takes to finish them, you will have a more flexible work environment than a nonexempt employee. So if you take a long lunch break today or come in late to work, your employer will not bat an eye. At the same time, if you do end up spending extra hours after work you will receive compensation for it.
Are There Any Downsides of Being an Exempt Employee?
You will never be able to negotiate for overtime pay even if you work tirelessly into the nights or over the weekends to execute a major project. You will always be on-call during office hours. If somebody is unable to come to work, you will be asked to fill in their space. If you fail to meet the benchmark your employer has set for you, you will lose the opportunity to get bonuses. And if your company is laying off workers and you are an entry-level worker, there is a likely chance you will be laid off first.
A nonexempt worker has the ability to earn an even higher wage rate during the holiday season. You will not receive the same benefit. If the nature of your company requires you to be present during a holiday, you will not only miss out on the festivities but also the scope of earning some more revenue. And if you consistently have to put in more hours than your allotted time, your performance may falter as your motivation decreases.
Salary will no longer offer you an incentive to work. You might end up doing the bare minimum knowing you will have a salary waiting for you at the end of the month.
If you hold an exempt position, you are likely to be paid more than regular employees. You will have a more flexible work environment and control your own hours. You also receive the same amount of pay irrespective of the number of hours you put.