DEFINITION of Non-exempt Employee
Non-exempt employee refers to a category of employees entitled to overtime pay and minimum wage as described in the Fair Labor Standards Act (FLSA). Non-exempt employees must be paid for each hour that they work and 1.5x their hourly wage for any hours worked over 40. Employees who earn less than $455/week and those who do not use personal discretion and independent judgment at least 50% of the time are considered non-exempt. Blue-collar, construction, semi-skilled and maintenance workers are non-exempt.
BREAKING DOWN Non-exempt Employee
Non-exempt employees earn a wage equal to or higher than the federal minimum wage set by the government. This group of workers is covered by the rules and regulations of the Fair Labor Standards Act where exempt employees are not. However, exempt employees receive many other benefits like the flexibility of a salary and consistent pay, basic health coverage and oftentimes some retirement plan. There is no difference in what non-exempt and exempt employees receive in terms of social safety benefits including weekly unemployment payments in the event a worker losses a job.
A maintenance worker is hired to work 35 hours at $15/hr. At $525/week, he passes the salary test (his income is greater than $455/week) but, as he cannot exercise discretion or independent judgment and is directly supervised, he is classified as a non-exempt employee. If he works 50 hours one week, he will be paid for the first 40 hours at his regular rate: $15. The additional 10 hours will be paid at 1.5x his regular wage: $22.5.
In this example, an exempt employee would earn $525/week regardless of having worked 50 hours. The non-exempt worker, on the other hand, has earned $825.
Pros and Cons of Non-Exempt Employees
The benefits and drawbacks of working as a non-exempt employee depend on the person. Some people enjoy receiving a wage for each hour they worked where others prefer the stability of a salary. In most cases, exempt employees earn more than wage workers because they are expected to complete tasks regardless of how long it takes. That could mean working 60 hours one week and as little as 35 in another. A non-exempt employee, on the other hand, only works a fixed amount of time. They are often held to stricter standards about breaks and total hours worked each week. Since non-exempt employees only earn wages for working, they often do not receive paid time off for vacation or holidays.