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Exempt and Non-Exempt Employees: What’s the Difference

Exempt and Non-Exempt Employees: What’s the Difference

Whether your employees are considered exempt or non-exempt impacts several things from whether they track their time to overtime pay eligibility. But before you can accurately categorize your workforce, you need to understand what exempt and non-exempt means—and what’s required for each group of workers. ‍

The classifications come from the Fair Labor Standards Act. This far-reaching federal law was created in 1938 after the Great Depression. It establishes a whole host of employment regulations including setting the federal minimum wage, creating rules for overtime pay, and establishing the 40-hour workweek. The FLSA also defines which employees are covered by the laws and which are not—non-exempt and exempt employees, respectively.

What are non-exempt and exempt employees? 

Non-exempt employees are workers that are covered under the FSLA. That means that you must pay these employees at least minimum wage for the number of hours they work. You must also provide overtime pay that is at least time-and-a-half for hours they worked beyond the 40-hour workweek. Non-exempt employees are almost always hourly. ‍

In contrast, salaried employees are usually considered exempt employees. According to the Department of Labor, this means that they’re exempt from the FSLA requirements regarding overtime pay and minimum wage. ‍

In theory, you should compensate your salaried employees enough that issues of 40 hour work weeks and overtime pay become moot—they’re required to fulfill their job duties, and their salary makes it worthwhile.

Can hourly employees be exempt? 

This is an important question with a bit of a complicated answer. While the FSLA regulates the treatment of most hourly workers in the U.S., there are some industries and jobs that are not included. In these cases, businesses can pay employees an hourly wage, but the employees aren’t protected by the FSLA. As such, they’re not required to receive overtime pay or minimum wage. ‍

The exempt workers include some parts of food service such as wait staff, truck driving, movie theater, and regular theater employees. In addition, jobs within the agriculture industry and outside sales positions are also often exempt, though they may be paid by the hour.

Do the requirements for non-exempt employees vary by state?

While the FSLA regulates employers across the country, individual states may have their own labor laws that come into play with non-exempt employees. The most prevalent is the minimum wage. While federal law sets a base for the minimum wage, most states enact their own and they vary across the country. For example, the minimum wage in Washington state is $13.50 per hour while the minimum wage in Texas is $7.25 an hour. ‍

Also while the federal law doesn’t regulate breaks or time for meals, states may have their own rules for how long breaks should be and whether they’re paid. As an employer, you’re required to abide by both federal and state labor laws. So be sure to educate yourself on any regulations that are specific to your state.

Can you pay an employee with exempt status an hourly rate?

In some cases, it might make sense to pay an exempt employee on an hourly basis. Perhaps the employee wants to take on an ad-hoc project that’s outside of her regular job duties or reduce the amount of time she works to less than full-time. However, in order to be exempt from the Federal Labor Standards Act, a salaried employee first must meet the duties test, which determines which types of jobs are eligible for exemption. ‍

Employers are then required to pay the worker on a salary basis. If a new work arrangement means that an hourly rate is more appropriate for an employee, then you’ll need to reclassify that person as a non-exempt worker. The employee is then eligible for overtime pay and must earn at least minimum wage.

Time tracking essentials for non-exempt employees 

In the construction, industrial and restaurant industries, non-exempt workers are a big component of the workforce. As an employer, staying compliant with FSLA regulations as well as the laws in the states you operate is critical. Run afoul of federal and state laws, and you could face penalties and lawsuits from your employees. ‍

Here are three ways you can properly track hours worked for your non-exempt employees and avoid compliance problems:

1. Document your employees work hours in real-time

It’s easy for hourly employees to fall into the habit of recording all their work hours at the end of a pay period. However, this practice leads to errors within timecards and estimates about how much people worked and when. While it’s most problematic with paper time cards, employees also estimate and report time in bulk when using time tracking software that requires manual entries.‍

People platforms such as Hourly, however, make it easy for employees to clock in via a mobile app in real-time. Managers or human resources staff can even institute location-based check-ins, which allow employees to clock in only if they’re at the designated work site. By eliminating the manual aspect of time tracking, you can ensure you’re tracking employee work in real-time, and then documenting their work hours for compliance, overtime, sick leave, paid time off, and more.

2. Properly track overtime hours and overtime pay

When your non-exempt employees work more than 40 hours, they’re immediately eligible for overtime pay. (In some states, overtime kicks after an eight-hour workday instead of a 40-hour workweek). Keeping meticulous track of the time employees work is not only smart business, but it also ensures you remain FSLA compliant. Employers who don’t pay overtime may be forced to pay employees back pay, associated damages, and attorney’s fees. ‍

A time tracking solution like Hourly makes it easy to see when employees are nearing overtime. You can set real-time alerts that denote when an employee is approaching the end of their regular hours and get an overview of total overtime worked by your team. With that information, managers can make smart decisions about whether overtime is warranted or find ways to avoid overtime expenses, such as bringing on different workers.

3. Ensure employees are taking breaks—and document them

FSLA regulations require that if an employer provides their non-exempt employees with a short break during the work (usually 20 minutes or less), that the break is paid. However, employers don’t need to pay employees for a dedicated meal-time, which is typically at least 30 minutes, as long the employees are allowed to do what they want during this free time. Different states also have varying takes on paid and unpaid breaks and lunches.‍

An automated time tracking app reminds your employees to take their breaks and lunches and provides documentation that they did. What’s more, a solution like Hourly can help ensure employees aren’t taking more than their allotted time—something called time card theft—and provide evidence if that occurs.

To exempt or not exempt … 

The nature of your business and the types of jobs you provide will answer the question of whether your employees are nonexempt or exempt. Knowing the differences between the two, and why it’s important to follow the rules for both will keep your company in compliance and out of trouble. ‍

Navigating the nonexempt worker landscape can be complex. But a solution like Hourly is your secret weapon. Take advantage of our time tracking software to automate and simplify your timekeeping for employees and managers alike.

The original article by Kelly Kearsley was published at


Time Tracking—Best Practices and Mistakes to Avoid

Time Tracking—Best Practices and Mistakes to Avoid

At first, glance, tracking employee time seems pretty straightforward. Your employees simply denote the hours they were at work on a timesheet, or punch a time clock and turn their time cards in at the end of the week or month. What could go wrong? ‍

As it turns out, a lot. The ability to accurately track employee hours is one of the most important tasks a business undertakes. Timesheets and time cards provide invaluable data to your business regarding how efficiently you use employee time, your labor costs, and areas for productivity improvement. ‍

For big and small businesses alike, finding ways to make your time tracking both easier for employees and managers is essential to improving margins, accurately bidding projects, and ultimately running a more successful company.

Time tracking trouble? 

Employers have long relied on manual timecards to track employee work hours. Employees either clock in and clock out or they’re responsible for recording and reporting how many hours they worked and when. The manual aspect makes the process vulnerable to errors, miscalculations, and estimates. ‍

In one 2018 survey, 44% of business owners reported that they regularly struggle with timesheet errors. An astounding 92% of the respondents reported that the errors were typically caused by the user. The biggest problem? Employees forget to record their time. That was followed by employees recording their time incorrectly or to the wrong job. ‍

Fortunately, you can implement the following time tracking best practices to simplify your timekeeping and improve the accuracy of your labor costs.

Educate employees about time tracking 

Make sure that your employees understand the importance of time tracking, as well as how your time tracking systems work and what’s expected of them. With each new employee, walk them through your time tracking tool, as well as the guidelines for how to track time. For instance, let employees know if they need to check in to a mobile app daily (versus entering data later).‍

Provide them with information about how long their breaks should be, what type of personal business is permitted on the job, and how they can correct entries if they made an error. Educating your employees will not only reduce errors and misinformation but can also prevent employee time theft.

Automate your system 

The next step to better employee time tracking is to get rid of manual timesheets and clocking in with paper time cards. Automating your record-keeping provides a host of benefits, from making it easier for employees to document their work time to streamlining the record-keeping for your HR or office administrators. It also provides for 100% accurate timesheets, eliminating the need for time clock rounding.

People platforms like Hourly offer time tracking apps that allow employees to easily document when they’ve begun working. You can automate breaks and lunches so that they’re always included in the report and even set rules so help ensure the employees work the time they’re required—and not more or less.

Make time tracking easy for your managers

Time tracking poses a problem for some employees, but it can also be the least favorite part of a manager or supervisor’s job. Managers routinely have to collect all employee timecards or reports, check them for accuracy regarding billable time worked, overtime, and correct any errors. What seems like a simple task can take up hours each month or week, especially if managers have to keep track of employee time because employees aren’t good about reporting their work hours.‍

Time tracking software solutions like Hourly not only simplify time tracking for employees, but they reduce the workload for managers as well. Your managers will be able to automate their reporting, quickly find missing information and headquarter all the employees’ time data in one place.

Time Tracking Management

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Avoid these 3-time tracking mistakes

It’s easy to keep doing things the same way. But when it comes to time tracking, finding small improvements and avoiding common pitfalls adds up to real savings. Sidestep these time tracking mistakes and you’ll add efficiency to your timekeeping system and improve the quality of your labor cost data.

Not collecting enough detail about employee work hours

There’s a fine line between trying to keep timecards simple and oversimplifying your data in a way that’s detrimental. For instance, employees should clock in at the beginning of each shift and clock out at the end, of course. But that’s just the basics. ‍

Tracking breaks, lunches, and regular work hours are required by federal law. Properly tracking over time is also essential. That not only ensures that employees get overtime pay but also allows your organization to better manage its resources and reduce overtime spending. You can even track hours to specific projects, job sites, and more. ‍

Time tracking tools such as Hourly allow you to document a higher level of detail about your employee work hours. Then you can generate practical data you can use to make smarter decisions about your labor.

Not leveraging time tracking software features

You don’t have to be a tech wizard to benefit from time tracking solutions like Hourly. The platform provides multiple, easy-to-use features that enable your company to run more efficiently, and frankly, get more from your timecard reports. For example, with Hourly, you can: ‍

  • Know who’s working in real-time. Log in to the app and see who is on the job—and whether anyone is missing.
  • Have employees clock in by location. With this feature, your employees can only clock in once they’re at the right worksite.
  • Geofence jobs. The software can send you an alert if employees are not where they’re supposed to be during the workday.
  • Set alerts for important issues. Hourly can send alerts if your employees head into overtime or switch work locations.

Not combining payroll, worker’s comp, and time tracking solutions 

All of these things are deeply related. By incorporating them into one solution you can reduce the time you spend, and improve your compliance with labor laws as well as documentation in all three areas. Hourly is the only small business solution that incorporates payroll, worker’s compensation, and time tracking into one application.

‍You can simplify your paydays, running payroll for employees, contractors and freelancers with the click of a button. Integrating workers comp ensures that you and your employees are covered in case of an accident and ensures that your vital employee information is all in place. Add in time tracking and you’ve streamlined a significant component of your HR function.

Time to clock out? 

Improving your employee time tracking doesn’t take much—and it’s well worth the effort. Explore how a people platform like Hourly can make time tracking easier for your employees, while also providing your company with increased efficiency, time savings and more.

The original article by Kelly Kearsley was originally published at

Featured Image Credits: Pixabay

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