Understanding Salaried Exempt and Hourly Non-Exempt Classifications

In the workplace, employees generally fall into one of two categories: Salaried Exempt and Hourly Non-Exempt. What’s the difference between these classifications, and how does it impact the jobs they perform? The most significant distinction lies in eligibility for overtime pay. An “exempt” employee is exempt from overtime pay, along with other wage and hour regulations such as rest and meal breaks.

Let’s explore the criteria that determine whether an employee qualifies as exempt from overtime pay.

Salaried Exempt Employees

For an employee to be classified as exempt, they must meet specific salary and job duty requirements. As of January 1, 2024, the minimum salary for exempt employees is $66,560 annually. Employers should review their exempt employees regularly to ensure they meet this threshold and adhere to the qualifying job duties outlined below. (note the minimum exempt salary is increasing to $68,640 on January 1, 2025.

Typically, exempt employees fall into one of five common categories:

Executive/Managerial: Manages at least two employees and exercises control over a department or unit.

Administrative: Holds a high-level role, often as a senior administrative assistant or department head, with decision-making responsibilities.

Outside Sales: Engages primarily in sales activities conducted outside the company’s premises.

Professional: Holds advanced roles such as teacher, accountant, medical professional, etc.

Computer Professional: Works in a digitally-based, creative, or technical role.

It’s important to note that job titles alone don’t determine exempt status. In each category, employees should regularly exercise discretion, independent judgment, and spend at least 50% of their time performing exempt-level duties.

Additionally, exempt employees have limited scenarios where pay can be docked for missed hours or days. Typically, if any work is completed during the week, the employee is due full pay for that week, regardless of the total hours worked. However, deductions may apply when an employee takes a personal day and lacks sufficient vacation or sick time.

Hourly Non-Exempt Employees

Non-exempt employees are entitled to minimum wage and overtime pay. In California, the minimum wage is currently $16.00 per hour for employers in 2024, increasing to $16.50 on January 1, 2025. Non-exempt employees must be paid at least time and a half for any hours worked over eight in a day or 40 in a week.

 Misclassifying employees can lead to significant penalties, including back pay, interest, and fines. Correct classification is essential to avoid these costly mistakes. Proper classification ensures compliance and supports a fair, well-structured workplace.

If you’re considering an exempt classification or have questions about employee pay structures, reach out to our HR support team at Infinium HR at hrsuport@infiniumgroup.com for guidance.