Exempt v. Non-Exempt
Q. What is the difference between exempt and non-exempt?
A. Exempt means exempt from overtime. In other words, you are not required to pay overtime. Non-exempt employees must be paid time and one-half for all hours worked over 40 per week.
Q. If I pay my employees a salary, does that mean I don’t have to pay them overtime for hours over 40?
Not necessarily. An employee can be paid a salary and still be non-exempt. In that case, hours over 40 must be paid at time and one-half the regular rate, figured by dividing the salary by the number of hours the salary is intended to compensate.
Q. How do I know if an employee should be considered exempt or non-exempt?
A. There are two tests an employee must meet to be classified as exempt. The first is the pay test. An employee must be paid at least $455 per week or a minimum salary of $23,660 per year. The second test is a duty test. Executives, professionals, and administrators may not spend more than 50% of their time performing non-exempt work. Outside salespersons can also be classified as exempt, there is no pay test, however, the employee cannot perform non-exempt work more than 20% of the time. Certain highly-paid commission employees of retail or service establishments, truck drivers and some others involved in the transportation of goods interstate, (and sometimes intrastate), members of religious organizations whose functions are spiritual or religious, volunteers, and a few others may be classified as exempt. A call to the Illinois and U.S. Department of Labor can help you determine industry specific exemptions.
Q. Can you give me examples of Executives, Professionals, and Administrators?
A. An executive is part of management, supervising at least 2 employees. They must have the authority or input on hiring and firing. A professional has to have formal education, and use discretion and judgment. Creative work of an artistic nature is also in this category. An administrator must have the authority to make meaningful decisions affecting operations. An administrator should perform exempt work relative to management policies or general business operations and exercise discretion and independent judgment in this work.
Q. What are some examples of Non-exempt work?
* Manual work
* Production work
* Routine clerical duties such as bookkeeping, billing, and filing
* Preparing payrolls
* Checking and inspection of goods as a production operation, rather than as a
supervisory function
* Performing maintenance work
* Repairing machines, as distinguished from an occasional adjustment
* Making a sale, replenishing stock, except for training purposes
* Performing the same kind of work as the employees supervised.
SOURCE: http://www.ilchamber.org/hr_illinois/hr_helpline_archive.html