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A salaried non-exempt employee is a worker type under the Fair Labor Standards Act (FLSA).
Designed to protect against unfair working practices, the FLSA provides employees with certain rights, particularly with regard to minimum wage and overtime pay.
A non-exempt employee is covered by these terms and is therefore entitled to minimum wage and overtime, while an exempt employee isn’t.
A salaried employee is an individual who is paid a set wage or salary in each pay period. Most salaried employees do not earn overtime.
A salaried non-exempt employee, therefore, is a combination of both definitions. These individuals earn a predetermined wage or salary in each pay period but also qualify for overtime pay and minimum wage. As such, this type of employment is relatively uncommon.
There’s a wide range of examples of salaried non-exempt employees, including:
- Movie theatre workers
- Live-in domestic help
Exempt vs. Non-exempt Workers
One of the most important differences between non-exempt and exempt workers is that you need to pay non-exempt individuals at least minimum wage.
You can find more information on minimum wage rates in your state on the Labor Department’s website. The US government also sets a federal minimum wage of $7.25 per hour—you’ll need to give your employees the higher of the two rates.
In addition, you’ll need to pay your non-exempt workers overtime for any hours they work over the standard 40-hour workweek. This rate must be at least one and half times their standard hourly wage.
Exempt workers under the FLSA typically work in professional, administrative, executive, outside sales, or computer-based roles.
Common examples include:
- Computer programmers
To qualify as exempt, your employees must earn at least $35,568 per year, which equates to £684 per week.
One of the most common reasons for a worker to be classified as salaried non-exempt is if they work a fluctuating workweek (FWW).
Under an FWW, the number of hours an employee works will vary each week. If you employ your workers under the FWW model, you’ll pay them a set salary per week, typically based on full-time hours, regardless of how many they actually work. In addition, you’ll also need to pay them overtime for any hours they work over the set number. This means the average hourly rate the employee receives will change depending on the number of hours they work.
In order to employ your workers using this method, their hours must legitimately vary from week to week. This may be particularly relevant in industries that have busy or seasonal periods. Let’s imagine you run an events company, for example. You may require your staff to work longer hours in the summer, when you’re hosting several weddings in one week, than you would during the winter period.
Before you introduce an FWW structure, it is important that your employees fully understand the terms of the agreement. For instance, they must understand that they’ll earn the same salary for a week in which they work 39 hours as they would a week in which they work five hours. Likewise, you should clearly explain the timekeeping method you’ll use to track their overtime.
Following an amendment to the FLSA in 2020, employers can also offer FWW employees incentives such as hazard and bonus pay.
Salaried Non-Exempt Employees vs. Hourly Employees
Rather than paying your workers a salary, you may choose to compensate them on an hourly basis. An hourly employee is paid for the actual number of hours they work and their pay packet will often be different every week or month.
Salaried non-exempt workers, however, typically receive the same compensation for each pay period. This is typically their annual salary divided into 12 equal monthly payments.
The exception to this is if the employee has worked overtime during the pay period. In this case, you will need to calculate their overtime and make an additional payment in their next wage packet.
How Often Are Salaried Non-Exempt Employees Paid?
Under the terms of the FLSA, you can pay your salaried non-exempt employees however often you choose. This could be on an hourly, weekly, monthly, or piece rate basis—this is where an employee receives a set sum for each unit or action performed. For instance, they may be paid for the number of vases they make or for picking a certain amount of fruit.
The only requirement is that your employees’ hourly pay must equate to at least the minimum wage.
The Pros and Cons of Salaried Non-Exempt Employees
Before you employ salaried non-exempt workers in your business, let’s look at the advantages and disadvantages of doing so.
As salaried non-exempt employees are relatively uncommon, some employers may unintentionally miscalculate their workers’ wages. This could result in serious legal or financial consequences for the company. Under the terms of the FLSA, businesses that repeatedly break the rules surrounding overtime or minimum wage could receive a penalty of up to $1,000 for each offense.
From a worker’s perspective, there are also advantages and disadvantages to being a salaried non-exempt worker. Because exempt workers tend to earn more than non-exempt workers, it could be preferable to have exempt status.
In contrast, exempt employees won’t receive additional compensation if they exceed the 40-hour workweek. This arrangement can mean they perform unpaid work. In contrast, salaried non-exempt workers will receive payment for all their hours worked. Likewise, they will also have the additional peace of mind of knowing that they will receive set compensation for each pay period.
A salaried non-exempt worker is an individual who receives a set wage for each pay period but is also entitled to rights under the FLSA. These primarily relate to minimum wage and overtime.
Remember, it’s essential that you properly understand which classifications your employees fall into. Otherwise, you risk improperly compensating your workers, which could result in legal action from them, investigations from federal bodies, and hefty fines.
If you’re uncertain about which category your employees fall into, it’s always a good idea to seek professional legal advice.