In my conversations with business owners, I’ll ask them to name 2 major classifications of their employees. What I typically hear are things such as full-time and part-time; or hourly and salaried, but rarely hear the answer I’m looking for: which is EXEMPT & NON-EXEMPT.
Most business owners have no idea that they are required to classify all jobs at their company as either exempt or non-exempt. Not doing this, or getting this wrong, can cost your company a lot of money.
So, what’s the difference between EXEMPT & NON-EXEMPT, and what’s the big deal?
It has to do with overtime. Most people think if the employee is salary, there’s no overtime; and if they are hourly, they get paid overtime, AND THAT’S NOT TRUE.
Exempt employees are not subject to overtime and to qualify as EXEMPT, they must pass these 3 main tests:
- They’re paid on a salary basis; which means they get paid a fixed amount and are expected to finish the tasks required of them, whether it takes 30 hours or 50 hours in a week.
SO, IF THEY’RE PAID HOURLY, THEY CANNOT BE EXEMPT.
- In New York State, they must earn a minimum annual salary,or threshold, based upon where they work. These salary thresholds just increased in NYS again, so starting January 1, 2020, if the employee works in:
- NYC or the five Boros, the NEW min salary threshold is$58,500 per year
- for Nassau, Suffolk or Westchester the NEW min threshold is $50,700
- and for the rest of the NYS, the min annual threshold is$46,020
SO, IF THE EMPLOYEE EARNS BELOW THE MINIMUM SALARY THRESHOLD, THEY CANNOT BE EXEMPT.
- The third test is that the employee performs job duties considered EXEMPT by the Department of Labor. These duties are not based upon the employee’s title; but instead, on the employee’s actual job duties. The most common department of Labor exemptions are for executive, administrative, professional, computer, and outside sales.
SO, IF THE EMPLOYEE’S ACTUAL JOB DUTIES FALL OUTSIDE OF THE SPECIFIC Department of Labor EXEMPTIONS, THEY CANNOT BE EXEMPT.
As a payroll company owner, my advice to you is to call your payroll company immediately and make sure all your employees are classified correctly as exempt and non-exempt. I would also suggest that you to ask your payroll company to verify that you are paying overtime correctly to all your employees.