An employees' classification, such as exempt or non-exempt, will determine a series of features and rights to which the worker is entitled, such as overtime wages or health benefits. In the United States, for example, non-exempt employees must be paid according to federal and state wage requirements and also receive overtime pay, according to the Fair Labor Standards Act (FLSA). Non-exempt workers are entitled to certain protections under that legislation that exempt employees do not have, but exempt employees enjoy other benefits.
According to the rules outlined by FLSA, non-exempt employees in the U.S. must be paid at least the approved federal and state minimum wage for the initial 40-hour workweek. These hours must be worked over the course of seven consecutive days. After an employee surpasses those hours, he or she is entitled to overtime pay, which must amount to at least 1.5 times the non-exempt employees' standard hourly wage. At some places of employment, overtime hours must be approved in advance by a manager. It is frequently up to the employee to outline and calculate weekly wages, so a level of trust between the employer and non-exempt employees must exist.
When an employee fills out tax paperwork for the payroll department at a company, both exempt and non-exempt employees are subject to many of the same guidelines. The salary for employees of both classifications is deemed earned income. Employees are subsequently subject to tax liabilities based on the tax bracket to which they belong, not their exempt or non-exempt status.
In contrast with non-exempt employees, workers who are considered exempt are subject to a some different standards. Exempt employees are paid according to a pre-determined salary each pay period, regardless of how many hours the employee worked. Often, health benefits and vacation time are considered in the pay package of an exempt worker.
Whether exempt or non-exempt status suits an individual depends on a number of factors. There might be more flexibility offered to exempt employees because these workers are under fewer time restrictions and must get the job done no matter how long it takes. Non-exempt employees, on the other hand, are expected to be as productive as possible within the normal 40-hour workweek before any overtime sets in and should also be able to use some time for breaks.