Exempt Employee

What is an Exempt Employee?

Employees who fulfill specific criteria are considered as the exempt employees. This implies that they are not governed by the Fair Labor Standards Act. In standard conditions, all workers should be compensated at least as per the federal minimum wage rule, and all working hours above 40 in one week should be compensated at least one and a half times their basic pay per hour. An exempted employee will be given fixed wages if he is exempted. Although it's uncommon for an exempted employee to receive less than a non-exempt employee.

A worker may be found excluded in a variety of forms. Employees who work for a company, are exempted from the Fair Labor Standards Act (FLSA), however, independent contractors and volunteers do not fall under this category. However, different countries have diverse wage standards and rules that companies are bound to follow

How Can Employers Determine if an Employee is Exempt?

Following are the three main tests that classify if employees are exempt or otherwise:

Salary-basis

To ensure the employee is being paid a salary and he is not being paid hourly. This means that the employee gets a settled sum of pay frequently. It does not concern the number of hours a worker has worked or the quality of work he has performed or submitted.

Salary-level

This test ensures that the salary of the employee meets the minimum threshold. No less than $684 weekly on a salary basis, or $35,568 annually.

Duties

Through this, the system looks at the sort of work the employee performs. It considers the type of work the employee has done. The job duties of an employee include Executive, Administrative, Professional, Computer Employee, and Outside Sales.

Those employees who qualify for the afore-mentioned criteria are excluded from extra time pay.

What Are the Categories of Exempt Employees?

The following are exempt employees categorically:

Executive Exemption

In this category, the primary job of the representatives must be managing the organization, or one department, or a particular division. Executive employees must supervise the work of a minimum of two employees frequently and they may have the authority of hiring and firing. The suggestions

of executive employees in terms of recruitment and exit, or any change in the status of workers are usually given critical attention by the strategic level management.

Administrative Exemption

In this category of exemption, the employees fundamentally engage themselves in office or non-manual tasks that directly concern managing or operating the organization or the operations of its clients. Along with that, their main duties must involve making independent judgments and exercising discretion on important matters.

Professional Exemption

In this type of exemption, the employees must perform a task that requires specialized knowledge about science or in the field of learning. This knowledge is obtained through extended specialized instructions. The example is teachers, doctors, or lawyers.

Info-tech exemption

In this type of exemption, the employees’ primary task is to apply and design computer programs or other systems related to that. The employees are software engineers, computer programming professionals, data operators, network administrators, system analysts, etc.

Outside Sales Exemption

The exemption is based on the employees’ basic task to receive orders from the clients or make sales of the products, which the organization sells, away from the organization’s physical office space. These sorts of workers are mostly paid additional commissions instead.

Highly Compensated Employees

These employees may be considered exempt employees if they perform primary tasks such as office or non-manual work. They also must perform a minimum of any one of the duties that are laid down in professional, administrative, or executive exemption categories. They earn a total compensation of $107,432 or more. It is worth notable the highly compensated employees must be paid weekly 684$. The organizations cannot consider incentive payments, like commissions or nondiscretionary bonuses to meet any part of the required standard weekly salary

What Are the Salary Requirements for Exempt Employees?

The exempt employee must be paid a fixed amount which is predetermined to be qualified as an exempt employee. The fixed amount must be a minimum of 684$ every week which also equals to annual $35,568. This payment neither takes into consideration the quality of work nor quantity. The employees must be paid this salary in full. Organizations must not take into account incentive

payments, like commissions, or nondiscretionary bonuses to meet any part of the required standards.

What Job Duties Qualify an Employee as Exempt?

Executive employees' dominion covers, the job duties may be Chief Operating Officer, Chief Financial Officer, Directing Manager, MD, or else.

Administrative exempt employees the job duties may be Human Resource Manager, Business Operations Manager, Marketing Manager, Financial Analyst, or the same.

Professional exempt employees: the job duties may be Lawyer, Teacher, Doctor, Architect, Engineer, Scientist, and similar.

Info-tech worker-exempt employees include: the job duties may be IT Manager, Software Engineer, Network Administrator, etc.

For Outside Sales exempt employees: the job duties may be Business Development Manager, Sales Representative, Direct Marketer, and similar jobs.

How Does Exempt Status Affect Overtime Eligibility?

The Exempt Status affects overtime eligibility in a significant manner:

Exempt Employees

It is not relevant to the quantity of hours the exempt employees have worked for. They will be paid by the organization a fixed salary. Their overtime hours are not counted towards compensation. Indeed, if they work more than 40 hours per week, the institution simply is not liable to pay them for extra hours. Examples of such roles are executive, professional, administrative, outside sales, or computer-related. Although, they're accounted for a high grade of responsibility and decision-making instead.

Non-Exempt Workers

Corresponding to the Fair Labor Standards Act (FLSA), non-exempt workers are qualified for overtime compensation. If these workers work more than 40 hours in a week, must be paid 1.5 times their regular hourly rate for all those extra hours beyond 40. Non-exempt workers are generally compensated based on the working hours they perform duties. These workers have more defined working hours than usual.

Organizations must draw on which workers qualify for exempt and non-exempt, apply proper labor laws, and avoid possible legitimate problems. Inappropriate categorization may result in several heavy amounts of fines and/or obligatory embargoes, etc.

 

Related: Exempt vs Nonexempt