# Understanding Non-Exempt Employee Status, Pros & Cons, and Job Types

![Non Exempt Employee](https://www.investopedia.com/thmb/WEWPKDicew783mWnwWBb9hj8OrE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/nonexempt-employee.asp-final-bb8b5ba990744ebcaf8435bb46798274.png)

*— Investopedia / Ryan Oakley*

## What Is a Non-Exempt Employee?

A few factors make an employee non-exempt, such as being entitled to overtime pay, earning less than $684 a week per federal law, and holding executive, administrative, or professional positions.

Non-exempt employees are workers who are entitled to earn at least the federal [minimum wage](https://www.investopedia.com/terms/m/minimum_wage.asp) and qualify for overtime pay, which is calculated as one-and-a-half times their hourly rate for every hour they work above and beyond a standard 40-hour workweek. These regulations are created by the federal [Fair Labor Standards Act (FLSA)](https://www.investopedia.com/terms/f/fair-labor-standards-act-flsa.asp).

### Key Takeaways

*   Non-exempt employee status is a federal designation that stipulates different rights an employee has.
*   Non-exempt employees are generally hourly-rate employees who must be paid an overtime rate of 1.5 times their hourly rate.
*   Exempt employees make at least $684 a week or $35,568 annually and are usually paid a salary.
*   Non-exempt employees typically make less than this amount but not always as the thresholds can differ by state.
*   Non-exempt employees’ rights are outlined in the Fair Labor Standards Act (FLSA), which was amended starting Jan. 1, 2020.

## Understanding Non-Exempt Employees

“Non-exempt” is a term referring to employees who earn less than $684 per week. Non-exempt means that the employee is not exempt from the FLSA and must be paid overtime. The $684 weekly wage, resulting in an annual threshold of $35,568, was put into effect on Jan. 1, 2020. It replaced the old weekly wage of $455.

Furthermore, non-exempt employees:

*   Are directly supervised by higher-ups who manage the workflow
*   Cannot be "bona fide executive, administrative, professional, and outside sales employees,” according to the FLSA. Individuals who are teachers, academic administrative personnel, and computer workers are also considered to be exempt.

Non-exempt employees are expected to dutifully carry out orders, without interjecting their own management decisions. For this reason, non-exempt employees tend to dominate job sectors such as construction, [manufacturing](https://www.investopedia.com/terms/m/manufacturing.asp), maintenance, and other work that involves physical labor or carrying out repetitive tasks. Assembly line workers are also a key example of non-exempt employees.

> **Important**
>
> If you are unsure of your employment status, speak with your human resources representative. If you feel like your position is misclassified, consider seeking legal counsel.

## Non-Exempt Employee Distinctions and Qualifications

Non-exempt employees are typically paid hourly wages, unlike [exempt employees](https://www.investopedia.com/terms/e/exempt-employee.asp), who generally earn fixed salaries. However, while non-exempt workers must receive overtime pay of one-and-a-half times their hourly wage, for all hours worked in excess of a 40-hour workweek, exempt employees are not legally entitled to collect overtime pay—even if their workweeks radically exceed 40 hours.

Under the FLSA, workers may be considered non-exempt if they either earn less than the $684 weekly minimum or have limited scope for self-supervision. Take, for example, a maintenance worker who’s hired to work 40 hours per week at $18 an hour. With typical weekly earnings of $720, they easily pass the salary test to be designated as an exempt worker, since their weekly income exceeds the $684 threshold.

But this worker is also directly supervised and therefore has a minimal opportunity for independent judgment. Hence, they are ultimately classified as a non-exempt employee. If this staffer works 50 hours in a single week, they would earn their regular $18/hour rate for 40 hours, while earning 1.5 times their hourly rate at $27 for each of the 10 extra hours they clocked in.

Under the FLSA, non-exempt employees must earn at least the federal minimum hourly wage of $7.25. However, [many states](https://www.investopedia.com/ask/answers/051815/which-states-have-lowest-minimum-wage.asp) and some municipalities impose higher minimum wages versus the federal floor. In these cases, the higher minimum wage overrides the federal rate.

## Fair Labor Standards Act Overview

The Fair Labor Standards Act created the Wage and Hour Division in 1938. This division oversees the administration and enforcement of labor laws that cover almost all [private](https://www.investopedia.com/terms/p/private-sector.asp) workers and government employees.

Though contested in 1941, the United States Supreme Court upheld the FLSA. Amendments to the original agreement have continually increased employment legislation including increasing the minimum wage from from $0.75/hour to $7.25/hour. The FLSA also covers overtime pay, allowable hours worked, maintenance of pay recordkeeping, and child labor laws.

### Note

The FLSA was last updated in September 2019 with the approved ruling going into effect on Jan. 1, 2020.

## Advantages and Disadvantages of Non-Exempt Status

Whether it is preferable to be a non-exempt employee versus an exempt one largely depends on an individual’s priority for [work-life balance](https://www.investopedia.com/articles/professionals/061113/maintaining-worklife-balance-financial-professionals.asp). The biggest benefit to being a non-exempt employee is arguably the ability to enjoy additional compensation for working long hours, although this may be at a lower rate than salaried exempt employees.

On the other hand, an exempt worker may be able to occasionally duck out of work early and still collect a full paycheck. That being said, non-exempt employees also tend to receive more protection under labor laws like the FLSA than exempt employees.

Because exempt employees are entitled to their full paycheck, they will receive a full salary every workweek, even if unforeseen circumstances such as a crisis require exempt employees to [work remotely](https://www.investopedia.com/personal-finance/work-from-home-guide/) or under new arrangements.

On the flip side, non-exempt employees in these circumstances are not entitled to pay if their physical presence is required for their jobs and they are unable to perform their duties. Either way, non-exempt employees are required to log their hours. For example, non-exempt employees folding clothes at a retail store will not get paid if the store is either undergoing remodeling or closed on a given week.

Meanwhile, retail store managers who are exempt might still get paid nonetheless for the remote work that they do in managing store operations.

Exempt workers are also more likely to receive [benefits](https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp) such as paid time off, healthcare coverage, and participation in retirement plans. However, both non-exempt and exempt employees are equally eligible for government employment benefits. Case in point: Both categories of workers qualify for Social Security benefits once they retire, and both may be eligible to collect weekly unemployment payments should they lose their jobs. 

Pros

*   Receive overtime pay often valued at 1.5 times their usual pay rate
    
*   May find it easier to find jobs as positions are often lower-skilled or more entry-level
    
*   Often receive greater protection under FLSA laws
    
*   Still qualify for government benefits (just like exempt employees)
    

Cons

*   Pay is often less as experience and knowledge is typically not as necessary compared to exempt employees
    
*   May receive less than ideal career advancement opportunities due to the nature of the role
    
*   Not entitled to pay if their physical presence is required but prevented
    

## Examples of Non-Exempt Jobs

Prior to accepting a role, ensure whether the position is exempt or non-exempt as positions may be classified differently depending on the nature of the role or company. In many respects, it may be easier to identify exempt positions and determine what positions do not qualify for exemption status. Examples include but are not limited to:

*   [Executive positions](https://www.investopedia.com/terms/c/c-suite.asp) must manage the enterprise or a department of it, have two full-time workers under their management, and have the power to make personnel changes.
*   Administrative positions must be engaged in office work related to the operations of a company to be exempt.
*   Professionals must meet payment thresholds and engage in intellectual work that may warrant advanced knowledge in a field of science or learning.
*   Computer employees must meet income thresholds and be employed as a programmer, engineer, or similar role that oversees the development or analysis of computer systems or programs.

If an employee does not meet any of the criteria above (noting that not all situations are listed), the employee must be treated as non-exempt.

## What Is the Difference Between an Exempt Employee and a Non-Exempt Employee?

The difference between an exempt employee and a non-exempt employee is that non-exempt employees are entitled to overtime pay. Exempt employees, on the other hand, do not qualify for overtime pay.

## Is It Better to Be an Exempt Employee or a Non-Exempt Employee?

Whether it is better to be an exempt employee or a non-exempt employee depends on a variety of factors, such as the type of job and a person's background, education, and personal situation. Exempt employees are generally paid higher and receive benefits at their jobs, such as retirement plans and health insurance; however, they are not paid for overtime and, therefore, may not be compensated appropriately if their job requires long hours.

## Can an Employee Be Salaried and Non-Exempt?

Yes, an employee can be "salaried, non-exempt," meaning that they receive a weekly salary (or however the employer chooses to pay) and qualify for overtime pay for any hours worked over 40 hours a week. Non-exempt employees do not have to be paid hourly; they can be paid in a variety of manners, via commission, salary, hourly, etc, as long as the compensation meets minimum wage requirements.

## The Bottom Line

The Fair Labor Standards Act (FLSA) determines various labor statuses. One of those statuses—non-exempt employee—is not exempt from overtime provisions and is entitled to overtime pay for hours worked beyond the standard 40 hours in a workweek. These non-exempt employees may be paid salary, hourly, or on another basis.

> **Article Sources**
>
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>     
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>     
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>     
> 4.  U.S. Department of Labor. "[Overtime Pay](https://www.dol.gov/agencies/whd/overtime)."
>     
> 5.  U.S. Department of Labor. "[Minimum Wage](https://www.dol.gov/general/topic/wages/minimumwage)."
>     
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>     
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>     
> 9.  U.S. Department of Labor. "[Fact Sheet #17C: Exemption for Administrative Employees Under the Fair Labor Standards Act (FLSA)](https://www.dol.gov/agencies/whd/fact-sheets/17c-overtime-administrative)."
>     
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