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Salary Exempt Employees: A Guide
Being classified as a “salary exempt” employee under the Fair Labor Standards Act (FLSA) comes with certain implications around pay and overtime. As an exempt employee, you give up some protections in exchange for typically higher pay and flexibility. This article provides an overview of what it means to be salary exempt.
What Does It Mean to Be Salary Exempt?
The FLSA requires that most employees be paid overtime (time-and-a-half) for any hours worked over 40 in a week. However, the law carves out certain exemptions for high-level white-collar workers. If your job qualifies, you can be classified as a “salary exempt” employee.
Some key things to know:
- You receive a predetermined weekly salary that does not change based on the hours you work. So no extra pay for overtime hours.
- You are exempt from minimum wage and overtime pay protections.
- You typically have duties that involve discretion, judgment, and specialized skills.
So in exchange for higher base pay and flexibility, salary exempt employees lose out on overtime. Whether that’s a good deal depends on your situation.
Salary Level Test
One way an employer can classify a worker as exempt is to pay them above a minimum salary threshold. This is known as the “salary level test.
“The federal threshold is currently $684 per week ($35,568 per year). If you make above that amount on a salary basis, you may qualify as exempt. But your duties also matter (more on that below).Some states have a higher threshold. For example, California requires a $58,240 annual salary to qualify as exempt. So be aware of your state’s specific regulations.
Common Exempt Job Categories
In addition to meeting the minimum salary, an exempt employee’s primary job duties must involve certain types of higher-level work. Some major categories include:
Executive Exemption
- Managers and executives like VPs, directors, etc.
- Customarily direct 2+ full-time employees
- Have authority over hiring, firing, promotions, etc.
Administrative Exemption
- Perform office or non-manual work directly related to business operations
- Exercise discretion and independent judgment on significant matters
Professional Exemption
- Work requires advanced knowledge in a field of science or learning
- Examples: lawyers, doctors, accountants, engineers, teachers
Computer Employee Exemption
- Computer systems analysts, programmers, software engineers
- Highly skilled computer professionals
So if your job title and duties fit one of those categories, and you meet the salary requirements, you can be classified as exempt from overtime pay protections.
Pros and Cons of Being Exempt
There are some key upsides and downsides to being a salary exempt employee instead of being eligible for overtime as a non-exempt employee:
Pros
- Higher base salary
- Flexible schedule
- More autonomy
- Reflects higher status
Cons
- No extra pay for long hours
- Can lead to burnout
- Less protections overall
So it’s a bit of a tradeoff. As an exempt employee, you lose overtime pay but potentially gain other benefits.
Other Things to Know
Here are some other important bits of information for exempt employees:
- You must still be paid your full weekly salary for any week you perform work. There are limited exceptions where pay can be docked.
- Exempt status can be taken away if duties or pay change to not meet requirements.
- Some specific industries like transportation and manufacturing have special rules.
- Federal regulations provide the baseline, but states can add additional worker protections.
So make sure to understand both federal and local labor laws if you are classified as a salary exempt employee. Reach out to an employment lawyer if you have questions or want to better understand your rights.
Being exempt comes with pros and cons. While you lose overtime pay, you gain other benefits. Learn the regulations and see if the tradeoff makes sense for your situation.