What is an exempt employee, how to know if you have one, exempt employee categories, and what to do. We cover it all here.
Most employees––especially those you pay hourly––are entitled to things like minimum wage and overtime pay. Exempt employees are not. The exempt status is a category set by the Fair Labor Standards Act (FLSA) to make it easier for you to hire people for salaried roles.
But you can’t just exempt any employee: There’s a system with many requirements, mostly on how much you’re paying and the individual employee’s responsibilities within your company. We’ll cover the details below.
By the way: If you’re still trying to work through the contractor versus employee dilemma, learn the right way to classify employees.
The guidelines on exempt employees are long and it’s easy to get confused. Let’s walk through each of the five categories for exempt employees. As you read through, treat it as a checklist: Your employee needs to check every box in one category to qualify for exempt status.
The terms get a little technical below, but we’ve broken them down and given examples so you don’t get lost in the legal jargon.
This refers to high-level employees in a company. Requirements to be exempt:
If an executive at your company checks all the above boxes, they are an exempt employee.
This can include HR and customer satisfaction employees. Requirements to be exempt:
If someone at your company checks all of the above boxes, they are an exempt employee.
There are two types of professional employees: Learned professionals and creative professionals.
Requirements for learned professionals to be exempt:
Yes, “computer employees” is just referring to people who work with computers. But not just anyone: This is referring to people who know how to code. Requirements for computer employees to be exempt:
The official language is especially confusing here, but it’s likely that if you have an employee who works with code––like a frontend developer or IT person––they’ll probably fall into this category.
This is the most unique category, since there are no restrictions on salary. But you’ll see why in just a minute––salary designations wouldn't make too much sense. Requirements for outside sales employees to be exempt:
If you’ve got an outside sales employee who fits the above description, they’re an exempt employee.
Yes, there are more rules. Because like the minimum wage, federal law only sets the baseline. After that, states can decide what they want to do. For example, in New York, the exempt employee salary threshold is $1,125 per week (instead of $684). So before hiring anyone, make sure to research the rules of the state they live in.
It changes further when you hire globally. The rules on this page only apply to people working in the United States. If you want to hire someone in Peru, for example, you’ll need to research an entirely new set of compliance rules.
Hiring globally can be a massive pain––that’s why we started Panther. We do all the legwork on compliance and subsidiaries: You can focus on finding the talent that you want, all across the globe. If global hiring is completely uninteresting to you, don’t click this link.