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Exempt vs. Non-Exempt Employees




Full Interview transcript

Carl: Hello business owners this is Carl Kleimann with another Business Survival Tip from Odyssey OneSource. Have you ever considered changing an employee’s pay from hourly to salary in order to avoid paying overtime? If so, listen closely. Overtime pay is governed by the Fair Labor Standards Act (FLSA) and paying an employee a salary does not make them Exempt from its overtime provisions.

Jobs that are governed by the FLSA fall into one of two categories – Exempt or Non-Exempt. Non-Exempt employees are entitled to overtime pay and the great majority of employees fall into this category. So, how do you determine whether an employee is Exempt or Non-Exempt? Most employees must meet three independent tests in order to qualify as Exempt. They are:

  1. Salary Level Test - Employees who are paid less than $23,600 per year ($455 per week) do not qualify for Exempt status. Employees who earn more than $100,000 per year are almost certainly Exempt.
  2. Salary Basis Test – To qualify as Exempt, employees must receive a salary or a "guaranteed minimum" amount of money for any work week in which he or she performs "any" work.
  3. Duties Test - An employee who meets the Salary Level Test and also the Salary Basis Test is Exempt only if he or she performs Exempt job duties, meaning relatively high-level work.

Tune in to the next edition for the overtime pay requirements for Non-Exempt employees. I am Carl Kleimann and this has been another Business Survival Tip by Odyssey OneSource, ranked as the number one Professional Employer Organization two years running by the Black Book of Outsourcing.

For more information on this and other issues affecting employers, please visit odysseyonesource.com.


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