AllBusiness.com
    • Starting a Business
    • Career
    • Sales & Marketing
    • AI
    • Finance & Fundraising
    • M & A
    • Tech
    • Business Resources
    • Business Directory
    1. Home»
    2. Finance»
    3. What Is the Difference Between Exempt and Nonexempt Employees?»
    Hiring staff concept

    What Is the Difference Between Exempt and Nonexempt Employees?

    AllBusiness Editors
    Accounting & BudgetingStaffing & HRLegal

    The difference between exempt and nonexempt employees is who gets paid overtime and who doesn't. Not knowing the difference between these categories could cost your business a lot of money.

    Employees who qualify as "exempt" are exempt from overtime regulations (and minimum wage laws), whereas "nonexempt" employees must be paid for every hour of overtime they work. The federal Fair Labor Standards Act (FLSA) and the laws of the 50 states regulate what constitutes "overtime."

    Many employers incorrectly believe that all salaried employees are exempt or that by paying an employee a salary, they automatically become exempt. However, just as the labels "employee" and "independent contractor" don't determine a worker's actual status in the eyes of the IRS, the same is true for exempt and nonexempt employees in the eyes of the federal and state labor departments.

    Other Articles From AllBusiness.com:

    • Travel Pay for Nonexempt Employees
    • 14 Key Issues in Negotiating Employment Agreements
    • Which Employees Are Exempt from Overtime Regulations?
    • Employees: Exempt vs. Non-Exempt

    Exempt and nonexempt status has little to do with job titles and whether an employee is salaried or receives an hourly wage (although in practice, hourly workers are never "exempt"). The legal definition of "exempt" and "nonexempt" has much more to do with an employee's level of responsibility or his or her status as a professional.

    The U.S. Department of Labor specifically designates certain classes of workers as exempt, including executives; administrative personnel; outside salespeople; highly skilled computer-related employees; and licensed professionals, such as doctors, lawyers, architects, engineers, and certified public accountants, among others.

    In addition, managers who hire and fire employees and who spend less than half their time performing the same duties as their employees are typically also exempt employees. In general, the more responsibility and independence or discretion an employee has, the more likely the employee is to be considered exempt.

    RELATED: 23 Hiring Platforms to Help You Find Your Next Great Employee

    Hot Stories

    Severance agreement concept

    Will I Get Severance Pay? What You Need to Know About Severance Agreements

    Entrepreneur writing a business plan before starting a business

    17 Pieces of Advice to Entrepreneurs Starting a Business

    BizBuySell
    logo
    AllBusiness.com is a premier business website dedicated to providing entrepreneurs, business owners, and business professionals with articles, insights, actionable advice,
    and cutting-edge guides and resources. Covering a wide range of topics, from starting a business, fundraising, sales and marketing, and leadership, to emerging AI
    technologies and industry trends, AllBusiness.com empowers professionals with the knowledge they need to succeed.
    About UsContact UsExpert AuthorsGuest PostEmail NewsletterAdvertiseCookiesIntellectual PropertyTerms of UsePrivacy Policy
    Copyright © AliBusiness.com All Rights Reserved.
    logo
    • Experts
      • Latest Expert Articles
      • Expert Bios
      • Become an Expert
      • Become a Contributor
    • Starting a Business
      • Home-Based Business
      • Online Business
      • Franchising
      • Buying a Business
      • Selling a Business
      • Starting a Business
    • AI
    • Sales & Marketing
      • Advertising, Marketing & PR
      • Customer Service
      • E-Commerce
      • Pricing and Merchandising
      • Sales
      • Content Marketing
      • Search Engine Marketing
      • Search Engine Optimization
      • Social Media
    • Finance & Fundraising
      • Angel and Venture Funding
      • Accounting and Budgeting
      • Business Planning
      • Financing & Credit
      • Insurance & Risk Management
      • Legal
      • Taxes
      • Personal Finance
    • Technology
      • Apps
      • Cloud Computing
      • Hardware
      • Internet
      • Mobile
      • Security
      • Software
      • SOHO & Home Businesses
      • Office Technology
    • Career
      • Company Culture
      • Compensation & Benefits
      • Employee Evaluations
      • Health & Safety
      • Hiring & Firing
      • Women in Business
      • Outsourcing
      • Your Career
      • Operations
      • Mergers and Acquisitions
    • Operations
    • Mergers & Acquisitions
    • Business Resources
      • AI Dictionary
      • Forms and Agreements
      • Guides
      • Company Profiles
        • Business Directory
        • Create a Profile
        • Sample Profile
      • Business Terms Dictionary
      • Personal Finance Dictionary
      • Slideshows
      • Entrepreneur Profiles
      • Product Reviews
      • Video
    • About Us
      • Create Company Profile
      • Advertise
      • Email Newsletter
      • Contact Us
      • About Us
      • Terms of Use
      • Contribute Content
      • Intellectual Property
      • Privacy
      • Cookies