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Non-Exempt Employee

Updated on April 30, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Non-exempt Employee?

A non-exempt employee falls under the nonexempt classification by the Fair Labor Standards Act (FLSA). Such an employee gets entitled to overtime pay if they work more than 40 hours a week. For every hour exceeding the mandated 40 hours, an employee receives 1.5 times their hourly rate payment from the employer.

Non-exempt Employee

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FLSA conducts a salary and duties test to decide eligibility for being a non-exempt employee. Companies pay salaries to these employees on an hourly or monthly basis and after considering non-exempt employee overtime. Their wages should not fall below the federal minimum wage. They can work on any post but without any supervisory power. 

Key Takeaways

  • A non-exempt employee can get understood as a person who does jobs related to physical labor for 40 hours a week to earn an income below $684 weekly or $35568 annually. 
  • As per FLSA, these employees get nonexempt from or are entitled to overtime at 1.5 times their hourly wage from employers.
  • These employees are blue-collar workers working under direct supervision without having decision-making abilities.
  • Overtime payment remains the major distinction between exempt & nonexempt employees where exempt dos do not get overtime, and nonexempt get overtime pay for every extra hour they work.

Non-Exempt Employee Explained

A non-exempt employee meaning refers to those workers whose wages and overtime come under the FLSA policy of the United States federal law. These employees work with a provision to get overtime at 1.5 times for working beyond an employer’s mandated 40 hours a week. Firms can pay their salary either on an hourly or monthly basis. Most employees doing physical labor get recognized as non-exempt employees under FSLA.

Hourly non-exempt employees typically perform non-managerial, hourly tasks that are essential to the day-to-day operations of a business. They may include positions such as administrative assistants, customer service representatives, production workers, and retail associates. The classification of non-exempt is determined by the nature of the job duties and the level of autonomy and decision-making authority the employee holds.

Nonexempt also means the employer has to pay them overtime for any extra work, as employers cannot exempt them from overtime. On January 1, 2020, FSLA put a cap of $684 weekly or $35,568 annual wage on classifying employees earning below it into nonexempt employees. The employee must perform all work as instructed without any self-judgment. So, their task is to finish the job according to their supervisors’ requirements.

Employers are required to accurately track the hours worked by non-exempt employees and maintain records of their time worked, including any overtime hours. Failure to comply with overtime pay regulations can result in legal consequences, such as fines, penalties, and lawsuits for wage violations.

FSLA has necessitated employers to pay at least an hourly wage of $7.25 to nonexempt employees. Car assembly line workers, agricultural laborers, or anyone doing repetitive tasks falls under this category.

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Qualifications

To qualify for non-exempt employee overtime as per FLSA, one must meet the following criteria. Let us understand each of them through the discussion below.

  • Employees must earn less than $684 weekly or $35568 annually. 
  • Work hourly or a maximum of 40 hours weekly. 
  • Must work under a direct supervisor.
  • Should not have any management or decision-making role.
  • They must not hold the posts of “bona fide executive, administrative, professional and outside sales employees” classified under FLSA.
  • Moreover, as per FLSA, they must not be computer operators, teachers, academic, or administrative personnel.
  • They must handle only blue-collar jobs that require physical labor.

Examples

Now that we understand the basics and intricacies of hourly non-exempt employee, let us also touch upon the practicality of processing salaries or other forms of remuneration through the examples below.

Example #1

Suppose Mr. X is working in a vehicle factory’s assembly line. Mr. X has to do the repetitive task of putting nuts into the vehicle gate daily. X works an average of 40 hours a week, and sometimes X also does overtime of 5 hrs. X gets an hourly wage of $12 and $18 as hourly for overtime.

Therefore, X gets $570 weekly under the FSLA provision. Hence the vehicle factory categorizes X as a non-exempt employee.

Example #2 

Suppose Mr. Y is working in a clothes factory’s cutting line. Mr. Y has to do the repetitive task of cutting clothes for the tailors of the factory every day. Y works an average of 40 hours a week, and sometimes Y also does overtime of 5 hrs. Y gets an hourly wage of $10 and $15 as hourly for overtime.

Therefore, Y gets $475 weekly under the FSLA provision. Hence the clothes factory categorizes Y as a non-exempt employee.

Example #3

Since 2004, overtime regulations have set the annual salary threshold for exempt positions at $23,660 (equivalent to $455 per week). Moreover, a duties test is employed to ascertain whether employees earning above the salary threshold must be classified as nonexempt from overtime. This includes assessments for meeting the executive, administrative, and professional exemptions.

Additionally, highly compensated employees (HCEs) earning total annual compensation of at least $100,000 are exempt from the FLSA’s overtime requirements. They must, however, fulfill a separate HCE duties test, which has a lower threshold compared to the test required for employees paid the standard salary level.

Unless classified as exempt, employees under the Fair Labor Standards Act are entitled to receive at least time and a half their regular pay rate for all hours worked beyond 40 in a workweek.

Do They Get Benefits?

Nonexempt employees are generally entitled to benefits offered by their employers, although the specifics may vary depending on company policies and applicable laws. Let us understand some of the common ones other than non-exempt employee overtime through the points below.

  • Benefits commonly available to nonexempt employees may include health insurance, retirement plans such as 401(k), paid time off (vacation, sick leave, holidays), and other fringe benefits.
  • The provision of benefits to nonexempt employees is often part of an employer’s overall compensation package designed to attract and retain talent, promote employee well-being, and comply with labor laws.
  • Employers may be required by law to provide certain benefits to nonexempt employees, such as healthcare coverage under the Affordable Care Act (ACA) for eligible employees working more than 30 hours per week.
  • The extent and eligibility criteria for benefits may vary based on factors such as employment status (full-time, part-time), length of service, and company policies.

Non-Exempt vs Exempt Employee

Nonexempt and exempt employees form an integral part of businesses and the economy. However, they have many differences between them, as discussed in the following table:

Nonexempt employeesExempt employees
Non-exempt employees get security from federal FLSA law.Exempt employees do not get covered by the government’s FLSA policy.
They get paid on an hourly or salary basis.These employees typically receive a salary.
Employers are bound to pay under the law to pay overtime at 1.5 times the hours beyond 40 hours to the employee.The employer does not pay them any overtime for working beyond 40 hours weekly threshold by the employee.
They never do supervisory or decision-making jobs in a firm.They can be assigned administrative, managerial, professional, or executive posts in a firm.
Nonexempt employee salary ranges from $684 weekly or $35568 annually.They earn $684 or more weekly &/or $35568 or more annually.
Their primary work area is physical labor.These employees usually never do physical labor. 
They get known as blue-collar employees.They get known as white-collar employees.
Their work does not impact the overall business or profitability of a firm.Their contribution to the growth of business and profit is inevitable.
These employees do not have to worry about any time-bound performance.They have to finish their project on time at any cost.
The government has already predefined non exempt employee benefits.Companies award these employees for their extraordinary performance.
They get fixed breaks during their work from their employer.These employees can take breaks as and when required beyond company timings.

Frequently Asked Questions (FAQs)

Is a salaried employee exempt or nonexempt?

As nonexempt employment means working 40 hours weekly, getting overtime and wage from the employer on an hourly or monthly basis, salaried employees are exempt.

How to classify employees as exempt or nonexempt?

A non-exempt employee differs from an exempt employee as they get overtime benefits mandatorily when nonexempted. In contrast, when exempted, the other does not get overtime for extra work hours.

Are non exempt employees hourly?

All nonexempt employees work on an hourly basis, but they may or may not get wages on an hourly or monthly basis. Again, it is because the employer decides the mode of payment.

Are nonexempt employees eligible for overtime?

Yes, FSLA has legally obliged employers to pay overtime to nonexempt employees at 3/2 of the hourly rate if they work beyond the forty-hour limit.

This article has been a guide to what is a Non-Exempt Employee. We explain its qualifications and examples and compare them with the exempt employee. You can learn more about it from the following articles –

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