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Which Is The Preferred Option: Exempt Or Non-Exempt?

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Many a time whilst filling an application for job postings you come across the words exempt and non-exempt. However, most applicants are unaware of what those two terms really mean.

1) What Is The Difference Between Exempt And Non-Exempt Employees?

The basic difference between exempt and non-exempt employees is that the formers must be paid for every hour of overtime that they work, whilst the exempt employees are, as the word implies, exempted from overtime regulations and minimum wage laws.



The Federal Fair Labor Standards Act (FLSA) makes it obligatory for employers to categorize their jobs as exempt or Non-Exempt. Non-Exempt employees come under and are protected by FLSA rules and regulations whilst exempt employees are not.

2) Is There A Difference In Earnings?

Employers must pay exempt employers a salary whilst non-exempt workers are paid wages. Exempt do not have to account for the hours they put into their work but are paid get the job done. On the other hand, wages for hourly work are paid to non-exempt employees who have to account for their work time on whatever record keeping procedure prevalent at their workplaces.

Even though exempt employees are paid fixed salaries and don't have to maintain hourly records, they must account for holidays, sick days and vacation days. Exempt employees are also likely to get bonuses, for jobs well done or other incentives for meeting preset targets and goals. It is seen that executive, supervisory, professional or outside sales positions are ones that fall under the exempt category.

More often than not exempt workers earn more than the non-exempt workers and their future prospects are also brighter.

3) Federal Fair Labor Standards Act (FLSA)

Non-Exempt employees are protected by FLSA. Companies that employ them must compulsorily pay, not lower than, the federal minimum wage for each hour worked. If they work beyond their stipulated 40 hours each week, they are entitled to overtime pay of not less than one-and-a-half times their hourly rate for any hours worked beyond their 40 each week. Exempt employees do not come under the FLSA protection ambit.

4) Are Their Different Tax Implications For Both Categories?

There is however, no difference in the way workers in either category are taxed. Both exempt and Non-Exempt employees are taxed on the basis of their, earned income and have to pay taxes according to the tax bracket they fall in. Whether you are earning the money as a salaried worker or as an hourly wage earner, the revenue earned is categorized as income by the tax-people.

5) What Are The Overtime Implications?

Exempt employees just ensure that their work gets done and adjust their timings accordingly. Some will work 35 hours a week, whilst others running for time, may push themselves to beyond 50 a week. But they will not be paid extra money for what extra hours they are putting in; neither will their salary be deducted for the less hours.

Non-Exempt workers have to be paid for every extra hour that they put in beyond their predetermined 40 per week. It is therefore beneficial for the employee to keep non-exempt employees hours short, whilst allowing the exempt workers to work at their own pace.

6) Workers' Rights and Benefits Implications

Although non-exempt employees seem to receive more protection and security under federal law than the exempt employees, employers treat them on equal terms. For them both are being paid for services rendered and there is no reason why they should not be perceived equally. Both, the exempt and the non-exempt are entitled to the basic workplace federal legislation, that includes providing a safe and healthful work environment, the right to equal employment opportunities, federal child labor laws and the rights provided under the Family and Medical Leave Act.

7) Prisoners Of Schedules

Exempt employees are less likely to be monitored and can spend time around the water-cooler or take an extended coffee break without incurring the boss's ire whereas non-exempt employees do not have the luxury and every minute at work is closely monitored and they are only permitted designated breaks at fixed times of the day.

8) Unemployment Benefit Implications

Even though unemployment benefits differ from state to state, both exempt and non-exempt employees are eligible to collect unemployment benefits. However, your location will determine exactly what those benefits are and it is suggested that the affected worker, check with his state's Department of Labor.

9) So Which Is The Preferred Option?

It all boils down to personal choice and personal convenience. Some workers preferred to get paid for every hour of their work, other prefer the flexibility and leeway that comes with salaried jobs. In a majority of cases exempt employees earn more money than non-exempt employees and they will often have to work more than 40 hours per week. If a non-exempt employee does that, he gets paid for it. Both have their pros and cons and it is a matter of what suits you best.
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