Unpacking the Definition of Non-Exempt Employees

5 of April, 2023

What exactly is a non-exempt employee? HR managers and business owners alike commonly ask the question. This article will unpack the definition of a non-exempt employee, from defining them under US law to executing the document management of them in the best way possible.

Whether you have just started hiring or have been managing your workforce for some time, understanding the definition of a non-exempt employee is crucial to stay legally compliant.

This article will equip you with the tools you need to confidently apply US labor laws and regulations when managing your documents and your workforce.

We’ll explore how to determine who qualifies as a non-exempt employee, what kind of employees are exempt, and how to properly document the classification of each worker in compliance with federal laws. Let’s dive in!

What Is a Non-Exempt Employee?

If you own or manage a business, it’s crucial to understand the different types of employees and the rules that govern them. Non-exempt employees are an important consideration, so let’s take some time to unpack what this type of employment means.

Simply put, non-exempt employees are hourly workers who must be paid a minimum wage for all hours worked, as well as overtime pay for any hours worked in excess of 40 during a given workweek.

Under the federal Fair Labor Standards Act (FLSA) and in most states, they are entitled to this wage and overtime compensation regardless of their job title, how they are paid or the type of duties they perform.

As part of the non-exempt employee classification, employers need to track hours accurately. This includes meals and rest breaks deemed necessary by law based on total daily work hours. Employers must also file records pertaining to wages earned and keep copies of such records on file for at least three years, and for a longer period if required by state law.

What to Consider When Classifying Employees as Non-Exempt

Do you know what criteria makes an employee non-exempt? It’s important to understand what defines non-exempt employees, as this affects their eligibility for overtime pay, meal and rest periods.

First, consider salary. An employer must pay a non-exempt employee either an hourly wage or a salary that meets (or exceeds) the minimum wage rate in their state. Second, consider job duties. To qualify as non-exempt, the job must require performing specific duties that have been classified as non-exempt under federal and state regulations.

These duties include manual labor, work involving repetitive operations with machinery or equipment, office or clerical work that is related to production or sale of goods and services, and some types of professional services like doctors or attorneys.

Finally, consider job control. In most cases, if employers permit employees to establish their own working hours with minimal supervision, they consider the employees exempt from overtime pay.

Defining “Exempt” and “Non-Exempt” Employee Status

So what do employers need to know when it comes to defining “exempt” and “non-exempt” employee statuses? It may sound complicated, but it’s actually pretty straightforward.

Exempt employees are those who are not entitled to overtime pay. These employees usually make more than a certain amount of money per hour, for example $23.6 per hour. Employers also require employees to meet duties tests regarding their job function to be considered exempt, and these tests vary from industry to industry.

Employers can pay non-exempt employees overtime if they work over 40 hours in one week. Non-exempt employees, such as hourly workers in the U.S., have certain rights under the FLSA when it comes to receiving overtime pay. FLSA regulations only permit full-time salaried workers to be designated as exempt from overtime pay.

If you use a software like Sesame for managing your HR processes, calculating overtime for non-exempt employees will be easier because of automation capabilities and simple timesheets designed to get accurate results quickly and easily.

Payroll Implications of Non-Exempt Employees

You might not know that non-exempt employees have different payroll implications than exempt employees. Knowing the difference between the two could save you trouble in the long run.

Overtime

Employers must pay non-exempt employees overtime compensation at a rate of 1.5 times their regular rate of pay if they work more than 40 hours in a given workweek. Employers do not have to pay overtime pay to exempt employees, regardless of the number of hours worked during a week.

Hourly Rates

Employers must pay non-exempt employees at least their state’s minimum wage rate and employees can demand an hourly based wage instead of receiving a salary. By contrast, exempt employee status requires that they receive an annual salary, and may or may not receive any additional compensation in cases where they go beyond 40 hours per week.

Benefits

Exempt employees usually have access to better benefits than non-exempt employees such as:

• Paid vacation time
• Health insurance coverage
• Retirement benefits, etc.

Employers generally do not provide these types of benefits to non-exempt employees, even if they work full-time or exceed 40 hours per week, because these employees do not meet the criteria for being classified as exempt under U.S labor law.

Conclusion

When it comes to understanding the definition of a non-exempt employee, the best course of action is to use tools like Sesame HR‘s employee tracking system.

Sesame allows you to easily track non-exempt employees, helping you to comply with complex regulations and ensure you’re providing adequate compensation for the hours your non-exempt employees work.

Non-exempt employees play an invaluable role in the workplace, so it’s essential to have a system in place that takes into account the complexities of their roles. Without proper tracking, employers risk misclassifying their workers as exempt and failing to pay them correctly.

Fortunately, Sesame HR’s employee tracking software provides employers with the necessary resources to stay compliant and guarantee appropriate compensation for their workers.