Hiring glossary
What is the difference between exempt and non-exempt employees?
Under the US Fair Labor Standards Act (FLSA), a non-exempt employee is entitled to the federal minimum wage and to overtime at one and a half times their regular rate for hours over 40 in a workweek, while an exempt employee meets the salary and duties tests that take them outside those protections.
The classification is a US federal concept, and job titles do not decide it. The Department of Labor says an employee is exempt only if their actual duties and their salary both meet the requirements in the regulations. Most exempt executive, administrative and professional employees must be paid on a salary basis of at least $684 a week. The Department’s salary-levels page gives $684 a week as the current federal standard level (a 2024 rule that would have raised it is not in effect). Highly compensated employees earning at least $107,432 a year can be exempt under a lighter duties test.
The duties tests are where most mistakes happen. The executive exemption needs a primary duty of managing the business or a recognised department and regularly directing at least two full-time employees (or the equivalent). The administrative exemption needs office or non-manual work directly related to management or general business operations, with discretion and independent judgement on significant matters. The professional exemption covers learned professionals (advanced knowledge from prolonged specialised study) and creative professionals. There are also exemptions for certain computer employees and for outside sales staff whose primary duty is selling away from the employer’s premises.
Getting it wrong is expensive because unpaid overtime builds up week by week. A salaried coordinator who mainly follows set procedures, or an “assistant manager” who spends most of the day serving customers, is often non-exempt despite the salary. Non-exempt staff need accurate time records, including work done before and after shifts.
Other countries do not use the exempt/non-exempt split. In the UK there is no legal right to overtime pay as such, but average pay across all hours must not fall below the National Minimum Wage; in Canada’s federal jurisdiction, overtime is paid at one and a half times after eight hours a day or 40 a week; Australia and India set hours and overtime through their own statutes and instruments. This is general information, not legal advice.
Also called: exempt employee, non-exempt employee, FLSA exemption.
Example
A US company advertises a salaried “operations coordinator” role. On review, the job mostly involves scheduling deliveries to a fixed procedure, with no authority over significant decisions. HR classifies it as non-exempt, sets up time tracking and budgets for occasional overtime at time and a half.
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