The Fair Labor Standards Act (FLSA) governs the maximum salary for non-exempt employees. For the most part, this means that employers can’t pay their employees less than $23,600 per year ($11.38 per hour). This is the full-time equivalent salary for a 40-hour workweek.
There are some exceptions to this rule:
If an employer pays their employees by the hour, they may pay up to $47,476 per year ($22.83 per hour) without breaking the law. This is called “the standard overtime rate” and it must be paid on top of any salary earned.
If an employee works more than 40 hours in a week, they’re entitled to time-and-a-half pay—which means they get paid 1.5 times their regular hourly rate for every hour worked over 40 hours in a given week.
There are also laws regarding how much time off employees get when they work more than 40 hours per week or if they work on weekends or holidays—but those are beyond the scope of this document!
Maximum Salary For Non Exempt Employees
The IRS recognizes two kinds of employees: exempt and non-exempt. There are many differences between these two types of employment, but the main dissimilarity is their pay for overtime work. In this article, we explain what non-exempt employees and salaries are, discuss some considerations for non-exempt salaried employees and provide some examples of non-exempt salaries.
Related: What Is a Full-Time Exempt Employee?
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What is a non-exempt salary?
A non-exempt salary is a set payment that awards employees overtime pay. The Fair Labor Standards Act (FLSA) protects the salary by regulating minimum wage, working hours and overtime recompense. The three main factors determining whether an employee receives this type of salary include the type of work, the wages and payment method (salary or hourly basis). Hourly employees receive wages for the actual hours they work, while salaried employees are paid according to their employers’ expectations. The minimum wage applies to both cases.
The basis employers use to calculate the compensation corresponds to the hourly rate of the employee. For example, an assistant manager making $48,345 per year earns about $26.94 per hour, based on a workweek of 40 hours. For a shorter workweek, the employee earns more per hour. Employees with a longer workweek earn a higher overtime rate.
Examples of employees who can receive a non-exempt salary include:
- Certain employees commissioned to sell services to end-consumers, such as mechanics and aircraft salespeople
- Employees of taxis, air carriers, railroads and delivery companies who receive salary for approved trip rates
- Chief engineers, news editors and announcers of certain non-urban broadcasting stations
- Domestic service employees who live with their employers
- Employees of motion picture theaters
- Farmers
Read more: The Difference Between Exempt vs. Non-Exempt Employee
What is a non-exempt employee?
A non-exempt employee is a person who receives a pay rate for working for a set number of hours, usually 40 in a week. When such employees exceed the set number of hours, they are entitled to receive overtime. The basis employers use to calculate the compensation corresponds to the hourly rate of the employee.
When can non-exempt employees earn a salary?
Non-exempt employees earn salary plus overtime through different methods, such as Fixed Salary (for a set amount of hours) and Fluctuating Work Week (FWW), also known as a Belo Contract.
For an FWW, employers have two options when it comes to paying salaries to their employees. The first entails paying a base salary to employees working for more than 40 hours a week and an additional premium for the overtime hours, often paid at one and a half times the regular hourly rate.
In the other option, employers pay their employees a salary that is inclusive of the overtime rate. For employees who work for more than the set amount of hours, all additional hours are paid at one and a half times the usual hourly rate. Both cases demand that the employers only pay for the actual number of hours their employees work and the suitable amount of overtime.
A Fixed Salary is applicable for employees with schedules that rarely fluctuate. It assures the employer and employee of specific base pay for each payroll period. The method is popular among employers who pay bi-weekly and have irregular base hours due to a versatile amount of work hours in a particular month.
When employers pay non-exempt employees a salary and overtime, their chosen methodology can accidentally lead to FLSA violations. The employer mandate is to ensure all employees receive at least the minimum wage and the correct overtime amount by correctly tracking the hours they work.
Related: 10 Tips to Negotiate Your Salary (With Examples)
Considerations for non-exempt salaried employees
To qualify for non-exempt salary, consider the state classifications and guidelines, which differ from one state to the next. Here are some general conditions that employees should meet to be exempt:
Executive exemption
The primary duty of the employees must be managing a subdivision, department or enterprise. They must also regularly direct two or more employees at work. Executives must be authorized to hire or fire other employees, or their recommendations and suggestions should lead to the hiring or firing.
Executives also conduct a wide range of management duties, including:
- Interviewing, choosing and training new hires
- Maintaining sales and production records to appraise the employees’ efficiency and productivity
- Handling grievances and complaints from employees, which may demand taking disciplinary actions
- Determining the machinery for use and merchandise to purchase
- Implementing or monitoring compliance to legal measures
Administrative exemption
Administrators’ primary duty is to perform non-manual work directly impacting the management or other general office operations. They must exercise independent judgment and discretion when handling significant matters.
Administrative professionals deal directly with general business operations like:
- Accounting
- Quality control
- Labor relations
- Computer network
- Safety and health
- Personnel management
- Employee benefits
Professional exemption
Professional employees have the primary duty of acquiring advanced knowledge through a learning process entailing prolonged, specialized and intellectual instruction. Similarly, the employees may be specialists in other fields like engineering, computer analytics and teaching. Professionals do advanced work.
Creative professionals have the duty of contributing to a recognized industry or artistic endeavor through various means, such as:
- Imagination
- Talent
- Originality
- Invention
Highly-compensated employees
High earners must perform one or more duties of an exempt administrative, professional or executive employee. They may qualify for exemption if they perform non-manual office work and earn $107,432 or more per year.
The total annual reparation for high earners should include:
- Earnings of at least $684 per week, payable as a fee or salary
- Credit for lodging or other facilities
- Medical life insurance
- Contributions to retirement programs
- Commissions
- Nondiscretionary bonuses
- Nondiscretionary compensation
- Fringe benefits
Computer exemptions
For computer exemption, you have to be a skilled employee working in the computer field and your job duties should meet the exemption criteria. Some common job titles include software engineer, computer programmer and computer system analyst.
The employee’s primary duties should include:
- Designing, documenting, analyzing, developing and testing or modifying computer programs and systems
- Applying system analysis procedures and techniques to determine software, hardware and system functionalities
- Designing, creating or modifying computer software for machine operating systems
- Combining several of the above-mentioned duties
Outside sales exemption
Outside sales employees have the primary duty of obtaining contracts or orders or making sales on behalf of their employers. However, the workplace of such employees should not be on the employer’s premises.
Outside sales involve many situations, such as:
- Driving to make deliveries or sell products
- Attending industry trade events and shows
- Regularly traveling to meet prospects
- Performing promotional work
The exemption rules intensify normal operations because some businesses don’t know the standard to use, whether federal or state. For all employees to be exempt, they must receive the minimum salary set by FLSA and pass their job duties test. State and federal laws frequently change, so check with the labor department in your state for the latest overtime guidelines in your local area.
Related: What Is Time and a Half? Definition and How To Calculate It
Example situations for non-exempt salary
Under the Fixed Salary method, employers and employees must agree in writing about the number of hours per week the salary signifies. The standard weekly working hours is 40, but employers can use a value fewer or greater than this number as long as the figure is greater than the federal and state minimum wages when divided by the hours worked. Employers divide the salary amount by the number of hours to determine the hourly rate.
For example, an HR Coordinator earning $36,400 per year working for 40 hours per week makes $700 per week. The hourly rate is $17.50. If the professional happens to work for 45 hours, the employers owe overtime at a rate of one and a half the usual amount ($26.25/hour). Therefore, the additional overtime amounts to $131.25, and when you add the regular $700 basic salary, the total becomes $831.25 for that week. If the employee only works for 30 hours that week, the compensation will be $525 ($17.50 times 30 hours).
The situation is a bit different under FWW. For example, an employee making an annual salary of $36,400 while working a 50-hour week schedule will earn a weekly salary of $700 ($36,400/52 weeks). The regular rate for such an employee is $14.00 per hour ($700/50 hours). In the weekly 50-hour work schedule, the employer owes the employee additional half-time overtime ($7.00/hour) for the extra 10 hours. Therefore, the employee would make a bonus of $70 on top of the $700 weekly base salary. The annual base salary of $36,400 plus half-time earnings of 3,640 annually amounts to $40,040.
In a scenario where the salary is based on working less than the usual 40 hours per week, employers pay for the set number of hours their employees work. Any hours over the standard 40 are paid at one and a half times the usual rate.
For example, an employee earning $36,400 per year for working 35 hours per week earns a weekly salary of $700 and has an hourly rate of $20 ($700/35 hours). If the employee works for 42 hours in an unusual week, they receive $700 for the 35 hours every week. The employee also receives an additional $100 for the extra five hours ($20 x 5). Therefore, the total weekly non-exempt salary amounts to $860.
