NON-EXEMPT EMPLOYEE: Meaning, Benefits, and Difference

Non-exempt employee
Image Source: Wenzel Fenton

When searching through job postings, you’ll come across a variety of terms, such as benefits and bonuses, among other acronyms. The terms “exempt employee” and “non-exempt employee” are other common ones that job seekers encounter. Before applying for a position, it is essential to get a firm grasp on the meanings of these various classes, despite the fact that you could be tempted to sail right past these terms. Here, we’ll explore the similarities between an exempt and non-exempt employee in terms of salary, benefits, and a real-world example of a nonexempt employee,s work situation.

What Is a Non-Exempt Employee?

A non-exempt employee is one who is entitled to at least the federal minimum wage plus overtime pay, which is one and a half times their hourly rate for every hour they work over a regular 40-hour workweek. The federal Fair Labor Standards Act enacts these regulations (FLSA).

Furthermore, A nonexempt employee can be paid an hourly wage, a salary, or some combination of the two. In addition, a  non-exempt employee:

  • Are managed by superiors who keep an eye on the whole operation
  • Employees who are not “bona fide executives, administrators, professionals, or outside sales representatives” are not covered by the Fair Labor Standards Act. In addition to those who work in the education sector, those who work in the IT industry are also exempt.

As a non-exempt employee, your responsibility is to follow the boss’s instructions without making any judgments on your own. A large number of non-exempt employees work in construction, manufacturing, maintenance, and other manual or repetitive jobs. In addition, the workers on an assembly line are a prime illustration of a non-exempt employee.

Does “Exempt” Mean “Free”?

Yes, exempt means free. For instance, if your accountant tells you that you’re exempt from taxes this year, give him a big hug. He is saying that you don’t have to pay taxes.

The Latin root of exempt is “exemptus,” which means “to take out” or “to free.” If you are exempt, you don’t have to follow a rule or regulation that everyone else has to follow, like paying taxes. However, there are times when you won’t have to follow the regulations; for example, if you’re a senior, you might not have to sell candy bars for the school fundraiser.

Non-Exempt Employee Salary

The IRS recognizes two sorts of employees: exempt and non-exempt. Overtime pay is a major differentiating factor between exempt and non-exempt workers.

What Is Non-exempt Employee Salary

A non-exempt salary is a fixed sum that provides employees with overtime pay. The Fair Labor Standards Act (FLSA) protects salaries by setting rules for the minimum wage, working hours, and overtime pay. The three key determinants of whether an employee receives this form of payment are the type of job, the pay, and the manner of payment (salary or hourly basis). Hourly workers are paid for the hours they really put in, whereas salaried workers are compensated in accordance with the demands of their employers. In both situations, the minimum wage is applicable.

The hourly wage is the standard that businesses use to figure out how much an employee makes in a year. For instance, an assistant manager making $48,345 a year would make around $26.94 an hour based on a 40-hour workweek. For a shorter workweek, the employee earns more per hour. Those who put in more hours during the week receive a greater overtime rate.

What Are the Qualifications for a Non-exempt Employee’s Salary?

For an employee to be covered by the FLSA under the non-exempt category, they must meet the following conditions:

  • Employees shall make no more than $35568 per year or $684 per week.
  • Work no more than 40 hours each week at hourly rates.
  • Must report directly to a supervisor.
  • No managerial or decision-making responsibilities should exist.
  • The positions listed as “bona fide executive, administrative, professional, and outside sales employees” under the FLSA cannot be held by them.
  • Additionally, they cannot be computer operators, teachers, academic, or administrative staff in accordance with FLSA.
  • They can only undertake manual labor-intensive blue-collar jobs.

What Are the Benefits of a Non-Exempt Employee?

Here are the top four advantages:

#1. Motivating Factor

Employers might motivate their staff to work harder by promising overtime pay of at least 1.5 times their hourly rate. However, since exempt workers receive a set salary regardless of how many hours they work, they have less incentive to put in extra effort outside of regular business hours.

#2. Overtime Pay

Because non-exempt employees are compensated based on the amount of time they put in rather than the tasks they perform, they are eligible for overtime pay if they put in more than 40 hours in a given workweek. When they work overtime, exempt workers are entitled to time and a half pay, which is their regular hourly wage plus one-half of that wage.

This is mandated by the Fair Labor Standards Act (FLSA). As a non-exempt employee, if you choose to work overtime on your own time or if you are required to work overtime as part of your job, you could make a lot of money because overtime pay can be very good.

#3. Flexibility in Roles and Job Duties

Administrative and management jobs are available to anyone who is not barred from getting overtime pay. It offers more work flexibility to both the business and the employee, which in turn increases the possibility of collaboration between different departments.

#4. Flexibility in the Wage Structure

Non-exempt workers, unlike exempt workers, can choose between getting paid by the hour or by a salary. This gives their employers more leeway in deciding on a pay structure. Also, the costs of hiring non-exempt workers who are paid the minimum wage are less than the costs of hiring non-exempt workers who are paid more.

What Is the Lowest Salary to Be Exempt?

As of January 1, 2023, an employee in the United States must be paid at least $684 per week or $35,568 per year to be considered exempt under the Fair Labor Standards Act. A salary that is at least two times higher than the state’s minimum wage is required to be paid to exempt workers in the country. The state of California has set its minimum wage for 2023 at $15.50 per hour.

This indicates that the wage basis for exempt workers in California is set by state law, not federal law, and that the state law salary basis is higher than the federal law salary basis. Also, read HOW DOES SALARY PAY WORK: How Salaried Workers are Compensated.

Exempt vs Non-Exempt Employee

The main difference between exempt and non-exempt employees is whether or not they get overtime pay. When compared to a non-exempt employee, who must be compensated for overtime, exempt employees receive a set salary regardless of how many hours they actually put in.

Another element of diversity is the varying salary regulations that apply. The federal minimum wage must be paid to all nonexempt workers, but the salary threshold for exempt workers is set at $684 per week (or $35,568 per year).

It shows that the minimum pay for workers who are exempt is higher than the minimum pay for workers who are not exempt. When divided by 40 hours of work per week, $684 is equivalent to about $17.10 in hourly pay (before taxes). This is significantly greater than the federal minimum wage of $7.25. Here is a brief difference between an exempt and non-exempt employee:

Non-Exempt EmployeeExempt Employee
Versatile in employment settingsJobs must be classified in a certain way.
Minimum wage requirements must be met.A minimum weekly salary of $684 ($35,568 yearly) is required.
Paid on an hourly or salary basis.May be compensated on a salary basis.
Must get overtime compensation of at least 1.5 times their regular hourly rate.Overtime pay is not due.
A Non-exempt employee gets security from federal FLSA lawExempt employees are not covered by the government’s FLSA policy.
In the workplace, you will never find them in a position of authority.They may be promoted to positions in administration, management, professional services, or executive management.
Their employer provides them with regular breaks throughout the day.The company doesn’t mind if these employees take breaks outside of normal business hours when they need to.
Difference between Non-exempt and exempt employee

What Is an Example of a Non-Exempt Employee? 

Let’s pretend Mr. A works on the cutting line at a textile plant. Cutting fabric for the factory’s tailors is a daily drudgery for Mr. A. In addition to A’s regular workweek of 40 hours, A occasionally puts in an extra 5-hour shift. A’s hourly wage is $10, with overtime pay of $15 per hour.

Because of the FSLA, A receives $475 per week. Because of this, A is not an exempt worker at the textile plant. Instead, she is a regular worker.

How Can HR Managers Make Sure That Laws About Whether an Employee Is Exempt or Nonexempt Are Followed?

To manage exempt and non-exempt employees in an efficient manner, HR managers can implement the following practices:

#1. Provide Easy Access to the Data for Your Employees

The employee handbook needs to provide information about regular work hours. If policies regarding overtime, breaks, and WFH are put out clearly, there should be no room for confusion. Also, as part of the onboarding process, employees should sign a document saying they know and agree to all the rules and conditions of employment.

#2. Maintain Regular Contact With Upper Management

It is up to department heads and line managers to let HR executives know about any changes or promotions that happen to an employee’s pay plan. This will ensure that workers receive the appropriate remuneration according to their status. Regular collaboration keeps the lines of communication open, so HR directors can find out about important new information or changes as soon as they happen.

#3. Always Remember the Regulations

It is very important to know the federal and state rules about how workers are classified as exempt or nonexempt. Although the line between exempt and nonexempt workers is not always black and white, the classification is based not just on the individual’s function and salary but also on the nature of their work. So, if HR has any questions about pay, they can ask an experienced labor lawyer for help.

Can Non-exempt Employees Manage Others?

Yes, it is totally acceptable for non-exempt employees to supervise other non-exempt workers. Even if an employee meets the requirements of the Fair Labor Standards Act, employers are not required to classify them as exempt. Employers are free to use non-exempt workers exclusively if they so choose.

What Is the Difference Between Hourly and Non-exempt Salaries?

It is possible for a firm to hire employees on a full-time basis, on a part-time basis, for a salary, on an hourly basis, as exempt employees, or as non-exempt employees, depending on the needs of the company. Because there are different regulations that apply to each classification, it is essential to have a solid understanding of the ramifications that come along with the numerous roles that can be played. 

It is common to pay exempt employees a salary, but a non-exempt employee can choose between a salary and an hourly rate, depending on the needs of the company. In most cases, the FLSA applies to both hourly and salaried non-exempt workers. However, there are some important parallels and distinctions between the two sorts of positions:

Salaried non-exemptHourly non-exempt
PaymentPaid on a salary basis     Paid on an hourly basis
HoursWork a fixed number of hoursPut in a predetermined amount of hours per week
OvertimeEligible to receive overtime compensationEligible to receive overtime compensation
Full-time or part-timeThe vast majority have full-time jobs and health insurance.Flexible scheduling; full-time employees may or may not be eligible for benefits
Difference Between Hourly and Non-exempt Salaries


In conclusion, the Fair Labor Standards Act (FLSA) sorts different kinds of work relationships into different categories. When an employee works more than 40 hours in a week, they are considered “non-exempt” and must be paid accordingly. These non-exempt workers could receive an hourly wage, a salary, or something else.

Non-Exempt FAQs

Are non-exempt employees hourly?

Nonexempt employees all work an hourly schedule, but they may or may not receive hourly or monthly pay. Again, it’s because the employer has the final say over the method of payment.

Who is an exempt employee?

An exempt employee is one who is not eligible for either overtime compensation or the federal minimum wage. However, employees who are exempt from overtime pay are instead pay a set wage for performing executive or professional duties.

What is a salary review?

A salary review is the evaluation process managers use to determine whether the salaries of their teams accurately and fairly represent their work performances and changes in the cost of living.

Are nonexempt employees eligible for overtime?

Yes, The Fair Labor Standards Act (FLSA) does mandate that employers pay nonexempt workers time and a half if they work more than 40 hours in a workweek.

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