Difference between Exempt and Non-exempt employees

Posted in Business
at 2016.05.28
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In management there are many issues that come involve the payment of employees. One of the main issues is whether an employee is a exempt or non-exempt employee. This is because the determination will change the mode of payment of the employee. Most employees prefer to be exempted so that they can be paid better but most employers prefer non-exempted so that they can pay fro the value of their work. In this research paper it will show the main differences between the two and how each will affect the payment of a similar job.

Differences between Exempt and Non-exempt employees

The two differences were set up by the Fair Labor Standard Act where the worker was only allowed to work only 40 hours per week. Beyond that the worker was entitled to be paid extra amount for the overtime which was at a higher rate of 1.5 to the normal hour payment although not all were allowed to be paid the extra amount. The act was to enable industries to employ more employees instead of overworking the current workers. Also payment of overtime was also more expensive than hiring new employees.


The definition of an exempt employee is one that is exempt from the provision of overtime set by the Fair Labor Standard Act. These provisions demand that they are not allowed to be paid overtime if they work over and above the 40 hours per week set. Those exempted are usually professionals in different fields such as computer, sales, administrative e.t.c and also executives


A non-exempt employee is an employee who is one who will be compensated for any extra time he or she works over and above the 40 hour per week set .The payment is usually more per hour than the normal time payment. Examples include opticians, workers in the production industry, and those that offer analytical skills.


The biggest difference between the two is the mode of payment. Whereas exempt employees are paid only a constant amount at the end of the month the non-exempt is calculated the extra pay for the extra time worked. If no extra time has been worked then he will be paid for the normal 40 hour per week.


There are also payment differences, an employee earning less than $455 per week becomes automatically a non-exempt employee. Any amount above that automatically qualifies one to be exempted.


Also an independent contractor and a worker who is volunteering are all exempted employees from the act. All other employees who are not professionals and do not fall under the white collar bracket are considered as non-exempt


A position which is not yet determined as exempt or non-exempt can result in the difference in payment in the same position. An exempt employee will be paid according to the company policy and also at the minimum salary payment set by the government will apply. An exempt employee should not ask for more than the set amount even if he works extra hours therefore the set amount will be final. If a position is set as non-exempt then the employee will be calculated the 40 hour basic pay and then if he worked extra hours the extra pay will be calculated. If he did not work any extra time then there will be no extra payment and thus his payment will be normal. Also if he did not work the 40 hour per week then he will earn less than normal. This creates uncertainty in the total amount that he will earn .Some of the factors that may alter the payment is if he falls sick during the week or if an emergency that requires his attention comes up. The time not worked will be removed from the calculation of the total payment. This creates a totally different base of payment between the two employees because one is a constant pay and the other varies with the hours worked

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