Exempt Employee

As an employee traverses their chosen career path, many opportunities contribute to their professional growth. As their level of experience deepens, they acquire new skills and talents that, all in all, influence their career. Among the changes that can happen as you journey through your chosen industry, you may also shift from being a non-exempt employee to being an exempt employee. What is an exempt employee? What kind of responsibilities do they have at work? What kind of job do they have? 

What is an exempt employee? 

In the United States, all employees are classified into two categories. You can either be an “exempt employee” or a “non-exempt employee”. These two classifications are guided by the Fair Labor Standards Act (FLSA). 

Exempt employees are employees who, according to the FLSA, do not qualify for the minimum wage and are not entitled to overtime pay. They are exempted from the regulations of the FLSA. Keep in mind that the exempt status under the FLSA applies to employees working for an employer. This means that those who are working as independent contractors or as volunteers are not classified as being exempt employees. 

How are exempt employees paid? 

Exempt employees are paid via a salary instead of an hourly rate. They earn a minimum of $684 on a fixed salary basis per week or $35,568 per year. Aside from FLSA standards, each U.S. state may have its wage standards that employers must follow. Employers must abide by both federal laws and state laws. 

How does an individual qualify as an exempt employee? 

There are three elements to satisfy in considering an employee to be exempt. These are: 

• How they are paid: exempt employees are salaried and not paid hourly. 
• How much they are paid: at least $684 fixed salary per week or $35,568 per year.
• The kind of work they do: executive, professional, or administrative.

To clarify further, being a salaried employee does not automatically make you an exempt employee. Your job and duties should also be considered exempt in nature. This is called the Duties Test. The Duties Test is composed of guidelines that outline the type of work that is performed by an employee. 

What are the types of job duties that an individual must have to be considered exempt? 

The Fair Labor Standards Act (FLSA) defines three main categories of exempt job duties. These three are: 

• Executive 
• Professional
• Administrative

Let us briefly go through each one. 

Executive Job Duties

• The employee’s primary duty must involve managing the business or a recognized department or subdivision. 
• The employee must direct the work of at least two or more other full-time employees or their equivalent.
• The employee must have the authority to hire, fire, and offer career advancement to other employees.

Professional Job Duties

• The employee’s job duties must require advanced knowledge in work that is intellectual. 
• The advanced knowledge must be in a field of science or learning. Examples are doctors, lawyers, teachers, dentists, among others. 
• The advanced knowledge must have been acquired from a specialized course.

Administrative Job Duties

• The employee must have a primary duty of doing office or non-manual work directly related to the management or general business operations.
• The employee’s duties include a level of discretion and independent judgment on significant matters.
• Compared with the other two classifications, the administrative category may be the most challenging to determine. For instance, company secretaries do administrative work but they are not considered exempt. Clerical work may be administrative but is also not considered exempt. Each job should be individually evaluated to make sure that the proper classification is decided.

Overall, the common denominator these three categories have in common is that the worker must have render work that is considered “high-level” with significant use of independent judgment and discretion. 

Remember, it’s not about the job title. It is about the specific tasks and duties that a worker performs. 

What are the benefits of being an exempt employee? 

The primary advantage of being an exempt employee is that you have a regular, steady paycheck. From a general standpoint, exempt employees are also more highly paid than non-exempt employees. Additionally, an exempt employee has more flexibility when it comes to working hours and has access to retirement benefits, pensions, 401(k) plans, and other benefits. Finally, they are entitled to paid vacation and sick days. 

What are the potential drawbacks of being an exempt employee? 

We have already mentioned the nature of the job duties of exempt employees. Depending on the specific role, exempt employees may find themselves working long hours beyond 40 hours per week just to fulfill all the necessary responsibilities. Not being paid overtime no matter how many hours you work can be a challenge.