Difference Between Exempt and Non Exempt
The terms exempt and non-exempt are very commonly used by organizations when they are dealing with payment of their workers. These are terms are used by the employers to refer to a deduction of a certain amount of their pay, which in turn, makes a big difference to the income of the company. This article will explain the fundamental difference between exempt and non exempt employees, and how this is important to the workers as well as to the people hiring them.
The terms exempt and non-exempt were first used by FLSA, a legislative body. FLSA represents the Fair Labor Standards Act, which came into existence to protect the interests of the work force. The employees often had to work overtime, without getting extra pay for the long hours. This was the reason why FLSA classified the workers as exempt and non-exempt. According to this classification, employees who are exempt do not get any overtime, even if they need to put in extra hours of work. Professionals, managers, supervisors and executives fall under this category; therefore, they are not required to note down the extra work that they put in, as they are not eligible for any overtime.
According to the stipulations of FLSA, non-exempt employees are those who require to be paid overtime for the extra hours they put in. so, when a non-exempt employee works for more than his specified time, then he needs to keep track of the extra hours put in. He will receive overtime at a rate that is not less than one and a half times his regular wages. There is however, no difference in the way the exempt and the non-exempt workers are taxed: both will be taxed according to their full income, irrespective of it being their salary, their extra income or overtime. Total income is taxed, irrespective of the way it is earned.
Generally, the non-exempt employees receive more protection under federal laws that those who are exempt workers.
It is difficult to identify which two situations are favorable for a person in financial terms. If a worker feels that he is not getting enough money, as he is losing overtime, then he can change is mode of payment. Instead of going for fixed salary, he can opt for hourly wages. In case of fixed salary, if there are more holidays in a week, the employer cannot induce him to take home a lower salary. He will receive the same pay. Then, his pay is more than the hours put in.