Salaried Exempt Vs. Salaried Non-Exempt
The main difference between salaried exempt employees and salaried nonexempt workers is that the former group does not have a right to overtime pay, but the latter does. If you choose to pay all your employees on a salary basis, you must determine whether they are exempt or nonexempt. The Fair Labor Standards Act (FLSA) governs federal minimum wage and overtime laws for exempt and nonexempt employees.
Whether an employee is exempt under federal law depends on her job duties. For example, executive, administrative and professional employees and some computer employees are exempt if they perform the duties as defined by the FLSA. Your state may have its own classification system for exempt employees, so contact your state labor department for applicable requirements. A salaried employee who does not perform the required duties for her occupation is salaried nonexempt. For example, employees who perform a lot of manual or routine work, such as accounting clerks, bookkeepers and paralegals, are nonexempt.
Under the FLSA, salaried exempt employees must receive a minimum salary of $455 per week, as of the date of publication. Salaried nonexempt employees must receive no less than the federal minimum hourly wage of $7.25. The state may have a different minimum wage requirement. For example, in California, salaried exempt employees must receive a monthly salary of no less than twice the state minimum wage, which is $8 per hour as of the date of publication. According to the U.S. Department of Labor, when both federal and state minimum wage law applies, use the higher rate.
Whereas salaried exempt employees are not paid according to hours worked, salaried nonexempt employees are paid that way. Unless a permissible deduction applies, salaried exempt employees must receive their full salary regardless of the number of days or hours worked. An exception applies when the employee does no work at all for the week; in this case, you do not have to pay her any salary for that week. For salaried nonexempt employees, salary is based on a specific number of hours worked, such as 35 or 40 per week. You pay full salary when the employee works the required hours.
If a salaried exempt employee works more than 40 hours per week, you do not have to pay him overtime. You may, however, give him additional compensation such as a bonus or extra time off. You must pay salaried nonexempt employees overtime at 1.5 times their regular pay rate if they work more than 40 hours for the week. To figure the regular rate for a salaried nonexempt employee, divide his salary for the pay period by the number of hours that salary is based on. Then, divide the result by 1.5 to get her overtime rate. Your state might have overtime laws that require overtime pay for work hours that exceed a specific number for the day. For clarification on state overtime laws, contact your state labor department.