Exempt vs. non-exempt employees

Non-exempt employees are paid hourly and entitled to overtime. Exempt employees are salaried and not eligible for overtime.

Under the Fair Labor Standards Act (FLSA) (opens in new tab) – a law that enforces fair employee treatment in the U.S. – there are two main types of employees: non-exempt and exempt.

Non-exempt

A non-exempt employee is entitled to a minimum hourly wage and overtime pay per FLSA regulations. (There may be additional state or local regulations for wages and overtime as well – this Department of Labor page (opens in new tab) has more information.)

Employers have to pay non-exempt employees one-and-a-half times their hourly rate when they work more than 40 hours a week.

Exempt

An exempt employee isn’t entitled to overtime pay (and in some cases, minimum wage). The Department of Labor (opens in new tab) classifies a number of different types of jobs as exempt based on the duties performed, including:

Executive, administrative, and professional employees.
Computer programmers and systems analysts.
Outside sales reps.
And several others.

Exempt employees are generally salaried — that is, paid a set amount per year, regardless of the number of hours worked. Salaries must meet the minimum threshold (opens in new tab) set by the Department of Labor, which as of 2017 is $47,476 for a full-year worker.

Employee status and health insurance

If you run a business with fewer than 50 employees, you’re not legally required to offer health insurance benefits to either non-exempt or exempt employees.

If you choose to, you can offer different health benefits to non-exempt and exempt employees, as long as you don’t discriminate against employees based on gender, race, color, national origin, religion, or health status. You also can’t charge different groups of people different rates for the insurance plans you provide.

Check out the Equal Employment Opportunity Commission’s compliance requirements (opens in new tab) for more details.