what is exempt employee

An exempt employee is an employee who is not eligible for overtime pay or minimum wage, based on the type of work they perform. They are usually paid a salary rather than an hourly wage, and they work in professional, administrative, executive, outside sales, and computer-related fields. Exempt employees are required to meet certain job criteria known as the duties test, which is set out in the Fair Labor Standards Act (FLSA). Employers are not required to pay overtime to employees who are properly classified as exempt, but they may choose to compensate such individuals for extra hours worked through benefits packages. In contrast, non-exempt employees are usually paid an hourly wage or earn a salary that’s less than a minimum amount determined by the Department of Labor (DOL), and they are entitled to minimum wage and overtime pay when they work more than 40 hours per week. It is important for employers to classify their employees correctly to avoid costly compliance violations.