What Is an Exempt Employee? | Requirements, Qualifications, and More

What Is an Exempt Employee?

Are all of your employees eligible to receive overtime pay? Some employees are exempt from overtime pay and minimum wage laws. Exempt employee qualifications are determined by the Fair Labor Standards Act (FLSA). In order to correctly run payroll, you need to be familiar with exempt employees. What is an exempt employee?  

What is an exempt employee?

To have exempt employee status, there are three exempt employee requirements that must be met. The worker must be paid on a salary basis, make the minimum salary for exempt employees, and have job duties that are considered exempt. Here is the criteria for exempt employees.

three requirements of employee exemption

Salary payment

The first criteria for exempt status is that exempt employees must be salary instead of hourly workers. However, being salaried does not necessarily mean an employee is exempt. There are many nonexempt workers who receive a salary rather than hourly pay.

Minimum salary requirements for exempt employees

Due to a DOL new overtime rule, employees must earn a salary of at least $35,568 per year, which is $684 per week, to be exempt from overtime pay (beginning January 2020).

An employee must earn at least $35,568 per year to have exempt employee status.

Job duties

One criterion for exempt status for employees is having high-level responsibilities. These job duties have specific responsibilities that qualify them for exemption. There are three main categories that exempt job duties are divided into.

1. Executive exemption

In order to fall under executive exemption, an employee must be able to meet the following requirements:

  • Manage your small business
  • Direct two or more full-time employees
  • Have the ability to hire, fire, promote, or change the status of other employees

2. Administrative exemption

To fall under the administrative exemption, an employee must meet the following requirements:

  • Perform office or non-manual work related to the general business operations or management
  • Use their own discretion when performing tasks without reporting to someone else

3. Professional exemption

To fall under the professional exemption, or “learned professional,” an employee must meet the following requirements:

  • Job duties require advanced knowledge in the field of science or learning (e.g., law, medicine, engineering, etc.)
  • Be certified in their particular field (e.g., college degree)

To fall under the “creative professional” exemption, an employee must meet the following requirement:

  • Utilize invention, imagination, originality, or talent in an artistic or creative field

There are also job duty exemptions for other types of employees, which includes computer-related occupations, outside sales employees, and FLSA highly-compensated employees.

Paying your exempt employee

You do not have to pay your exempt employees overtime wages or minimum wage. When it comes time to determine how to set salaries, consider the tasks your employees do and how much they work.

Exempt employees do not receive overtime pay.

If your salaried employees frequently work more than 40 hours in a week, you might want to think about increasing their pay. You don’t want to take advantage of the fact that they cannot be paid overtime and compensate them poorly.

Be clear to your employees when you hire them that they are exempt from overtime wages. That might prevent any misunderstandings and wage disputes in the future.

Patriot’s online time and attendance software add-on to our online payroll software will make timekeeping easier for you. Employees can clock in and out online. Once you approve employee time cards, the hours are automatically entered when you run payroll. Try both for free!

This article was originally published on 12/29/2011.

This is not intended as legal advice; for more information, please click here.

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