It can be a little confusing as to how you should categorize your employees, but it’s vitally important for your business to get right. Let’s break it down.
Your employees can be categorized as exempt (which means they are not eligible for overtime) or nonexempt (which means they can earn overtime). Their exempt or nonexempt status is entirely based on how they get paid and the type of work they do. If you aren’t exactly sure where they stand, here’s a quick summary of how to categorize them.
- Salaried employee with no overtime (Salary/Exempt): This classification means your employee earns a fixed salary regardless of how many hours they work.
- Salaried employee who is eligible for overtime (Salary/Nonexempt): This classification means your employee earns a fixed salary if they work 40 hours or less in a given week. They’re also eligible for overtime if they work more than 40 hours per week. Keep in mind that these regulations change depending on the state you’re in.
- Hourly employee who is eligible for overtime (Hourly/Nonexempt): This bucket means that employees earn money based on the amount of hours they work. They also earn overtime when it applies.
Want to dive deeper into the differences? Check out this article to learn more.Updated August 18, 2017
This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business.