It can be tricky to determine whether to classify your employees as exempt vs nonexempt. Good thing we’re here to help.
Exempt vs. Nonexempt:
Exempt means that an employee doesn’t receive overtime pay regardless of hours worked. Nonexempt means that an employee must receive overtime pay (typically at a rate of time and a half) for hours worked over 40 hours per week.
Nonexempt employees:
Nonexempt employees are typically paid hourly, perform repetitive tasks, and hold entry-level, data-entry, or non-managerial positions.
Examples of exempt employees include:
- Administrative: executive assistants, customer service and sales representatives
- Retail: cashiers, stock attendants, and other on-the-floor employees
- Construction: carpenters, electricians, and mechanics
- Healthcare: medical assistants and receptionists
Exempt employee meaning:
In contrast, exempt employees are paid a set salary, and pay cannot be docked. If the employee works at all during the day, then they must receive their full day’s wages.
Not just any employee can be considered exempt; to be considered exempt, the employee must regularly utilize independent judgment and discretion in their position and have at least one of the following job duties:
- Executive: The employee supervises at least 2 full-time employees or their equivalent in part-time hours on a regular basis, and/or has managerial responsibilities of the business, such as hiring employees and delegating tasks.
- Administrative: The employee performs office or non-manual tasks that assist operations, and/or organizational or customer management. This does not apply to secretarial work.
- Professional: The employee holds a specialized advanced degree or equivalent certification required for the role, and whose primary duty requires advanced knowledge and the regular exercise of discretion and judgment.
- Creative: The employee works in a creative field and uses their originality, talent, imagination, and inventiveness for their position.
- Computer: The employee performs systems analysis, program design, and operating system testing.
- Outside Sales: The employee must be primarily making sales and/or securing contracts/orders while outside of the office
To also be considered exempt, the employee must meet certain salary requirements:
- For exempt status in 2026, the employee must make a minimum salary of $35,568.
- If an employee is highly compensated, this can meet the requirement to be exempt, along with at least one of the job duties listed above. The employee must have an annual salary of $107,432 (at least $684 per week).
- However, the minimum salary can be significantly higher depending on what state you live in. California, Colorado, Maine, New York, and Washington have salary thresholds that are higher than the federal level. As a reminder, when federal and regional regulations differ, the employer must use the one that benefits the employee the most.
| Exempt vs. Non-Exempt Workers Overview | ||
| Category | Exempt Employees | Non-Exempt Employees |
| Primary Determining | Must be a salaried employee and meet the minimum salary and job duty requirements | Can be hourly or salaried employees who do not meet the minimum salary and job duty requirements |
| Overtime Eligible | Not entitled to overtime pay, regardless of hours worked | Must receive overtime pay for any hours worked over 40 in a workweek (1.5x regular rate) |
| Pay Basis | Typically paid on a salary basis (fixed amount for each pay period) | Typically paid on an hourly basis, based on the actual hours worked |
What happens if my employee is misclassified?
If your employee is misclassified as exempt, they may be entitled to back pay for lost overtime wages, and you may receive civil penalties up to $1,000 for each violation. If this misclassification is determined to be intentional, you may be prosecuted in criminal court and receive fines up to $10,000 and/or imprisonment.
Contact our experts for help! Nextep’s Human Resources Business Partners (HRBPs) can help you audit and classify your employees so you don’t have to break a sweat.
Nextep delivers HR services that elevate your business with an innovative, easy-to-use platform centered on people. We strive for accuracy, but our information isn’t legal advice.
