Career Development

The Pros of Being an Exempt Employee

June 11, 2021

In the USA, employees may be classified into two groups at work: “exempt” and “non-exempt.” So if you're a Canadian trying to get into the US job market, you could be asked on a work application to decide which group you fall into, even though you're not sure what the difference is. In this article, we discuss what an exempt and non-exempt employee is, the advantages of being an exempt employee, the requirements, and, of course, key differences between an exempt and non-exempt employee.

What is an exempt employee?

The US Fair Labor Standards Act (FLSA) sets out exempt employees as a category of employees who do not receive overtime pay or are exempted from both minimum wage and overtime pay because they meet certain requirements stated by the Act. These distinct requirements would be briefly explained below as well as various job benefits.

Characteristics of an exempt employee

Certain factors set an exempt employee apart from regular employees. We'll quickly run through these characteristics in this section of the article. Exempt employees are usually:

  • Paid on a salary rather than an hourly basis, and their work is either executive or professional
  • Distinguished from non-exempt employees, who are required to be paid at least the minimum wage and overtime when working more than the standard 40-hour workweek.
  • If an employee falls into one of the above categories, is salaried, and earns at least $684 per week or $35,568 per year, they are exempt.

Exempt employee classification

Under the Fair Labor Standard Act (FLSA), which regulates the exempt employee status, certain job classifications are automatically exempt. These jobs are usually executive or administratively inclined instead of other regular jobs. Because they are exempt, employers generally give these employees a burden of responsibilities.

The following job classifications are generally exempt in the US:

Administrative

The administrative role in any organization is essential because these employees are responsible for the seamless operation of the organization's activities. The following are the general roles of administrative employees:

  • Evaluating employee performance and providing training and direction to ensure maximum efficiency
  • Organizing and planning certain administrative procedures and operations as well as developing methods to streamline processes
  • Recruiting and training new employees, as well as allocating responsibilities and office space

The FLSA requires administrative employees who want to be exempt to fulfill the following requirements:

  • The employee must be on a salary basis; and at a rate at least equal to the standard salary level of $455 per week ($684 per week effective January 1, 2020)
  • The employee must be in charge of the organization's operational activities, including other employees and customers.
  • The employee must have the discretionary powers to make significant decisions within the organization.
  • The employee's primary duty must include the training and management of other employees.

Professional

This category is for advanced or technical professionals in specific fields. It includes jobs that require a lot of specialized skills and knowledge of a particular area. Here are a couple of general roles expected of professional related jobs:

  • Understanding of critical aspects of a specific field
  • Training of other employees on a particular subject related to the said field and coordination of such training
  • Creative and technical contributions to the organization or company

To qualify for the professional exempt category, the FLSA requires that:

  • The employee must be on a salary basis; and at a rate at least equal to the standard salary level of $455 per week ($684 per week effective January 1, 2020)
  • The employee must be in the field of science or learning
  • The employee must perform duties along the line of inventions, originality, imagination, and creative directing
  • The employee's training is customarily acquired through a lengthy course of specialized intellectual instruction

Executive

If your job description falls under the executive role of any organization, you can apply to be an exempt employee by default. The general role of an executive related job usually includes:

  • Creating and putting into action strategies to promote the organization's mission and “voice.”
  • Developing comprehensive business plans to achieve the board of directors' goals and objectives
  • Creating an effective leadership team by guiding and coaching subordinate managers

Under the FLSA, to qualify for the executive exempt category, the employee must satisfy the following criteria:

  • The employee must be on a salary basis; and at a rate at least equal to the standard salary level of $455 per week ($684 per week effective January 1, 2020)
  • The employee must be in charge of supervising at least two full-time employees.
  • The employee's primary duty must involve managing the organization or business or an important subdivision of the company.
  • The employee must also have the authority to change or affect the status of other employees (that is, the hiring and firing, promotion and demotion of employees)

IT professionals

This category is quite broad as it covers a range of computer-related professions such as computer analysts, software engineers, IT professionals, and so on. The exempt requirements, in this case, might be decided by the organization's policies. However, here are a few general roles of computer professionals:

  • Examining and assessing existing systems
  • Analytical skills
  • Determining system requirements
  • Managing and monitoring system infrastructure and installation
  • Ensuring the smooth running and operation of all working systems

Under the FLSA, to qualify for the computer professionals exempt, the employee must satisfy the following criteria:

  • The employee must be on a salary basis; and at a rate at least equal to the standard salary level of $455 per week ($684 per week effective January 1, 2020) or must be on an hourly rate of $27.63 per hour
  • The employee must be employed to perform the duties of a systems analyst, systems engineer, or a computer programmer
  • The employee's primary duties must include a combination of computer or systems related roles
  • The employee must be in charge of system techniques and procedures as well as consulting with users to ascertain hardware, software, and system functional specifications

Outside sales

The outside sales job category is an individualized kind of job. It involves working outside the organization yet providing services for the organization. More or less like a contract staff. Here are a few general roles of an outside sales representative:

  • Using different customer sales methods to obtain sales
  • Evaluating customers' skills and needs, as well as developing a means to maintain productive long-term relationships
  • Optimizing sales strategies to forecast sales and estimate future sales

To qualify for the outside sales exempt category, the FLSA requires that:

  • The employee works alone
  • The employee's primary duties include making sales which are defined in the FLSA Section 3(k)
  • The employee assists the organization in obtaining contracts for services or the use of certain facilities.
  • The employee receives commission rather than a wage rate or overtime pay.

Advantages of exempt employment

Consider these advantages of exempt employment:

Salary security

Exempt employees have a more stable and reliable income when compared to non-exempt employees. The reason being the fact that they have a stipulated and fixed income for whatever service they provide or role they perform. They don't have to have worked a certain amount of hours. As long as they get the work done, they get paid.

Higher salary minimum

Compared to regular workers or non-exempt employees, the minimum salary of exempt employees is higher. Exempt employees have a lot more workload and are heavily invested in the daily operation and management of the organization; hence they are paid more.

Work flexibility

Because exempt employees do not work by the hour, their work schedule is quite flexible. All they have to do is complete the task they're asked to perform in time. They do not always have to resume work physically. They can work remotely and delegate tasks and duties wherever they are, unlike non-exempt employees who have to check-in and out at the start and close of working hours.

Eligibility for certain benefits

Depending on the organization's policies, exempt employees have certain exclusive benefits they enjoy. For example, some organizations offer a company car or even accommodation to their exempt employees.

Differences between exempt and non-exempt employees

  • Non-exempt employees can charge overtime, unlike exempt employees who aren't paid by the hour.
  • There is also a significant difference in pay between an exempt employee and a non-exempt employee.
  • Exempt employees usually have more tasking job duties when compared to the responsibilities of a non-exempt employee.
  • Because of the several responsibilities exempt employees have to handle, they usually have to spend more time working.
  • Exempt employees enjoy certain privileges and benefits not available to non-exempt employees.
  • Exempt employees are often full-time employees, while non-exempt employees do not always have to be.

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