There are two types of employees — “exempt” and “non-exempt”. You might’ve seen these terms on job postings, or heard them in conversation.

If you aren’t sure what they mean, don’t worry — here, we’re going to break them down.

Exempt vs. Non-Exempt Employees

One of the biggest differences between exempt and non-exempt employees is overtime pay. An exempt employee is not entitled overtime pay by the Fair Labor Standards Act (FLSA).

Instead, exempt employees are given a salary, and they are expected to finish the tasks required of them, whether it takes 30 hours or 50. Exempt employees are also excluded from other FLSA protections afforded non-exempt employees.

To be exempt, an employee must earn a minimum of $455 per week, or $23,660 per year, in the form of a salary, instead of on an hourly basis.

The most common roles considered exempt include professional, executive, outside sales, and administrative.

On the flip side, non-exempt employees must be paid overtime — one-and-a-half times their hourly rate, for any hours worked beyond 40 each week. As the name implies, they are not exempt from FLSA regulations.

Most non-exempt employees must be paid federal minimum wage ($7.25 in 2018). Non-exempt employees can be paid either a salary or an hourly wage.

Let’s consider this example to demonstrate the difference between exempt and non-exempt:

Sarah, who is an exempt employee, is stressed because she hasn’t finished her proposal due Monday. She spends most of Friday night tweaking it and finishing it up, staying at the office until late. On Monday, she gets her paycheck — the same amount of money she would’ve gotten if she hadn’t stayed late.

Meanwhile, John, who is a non-exempt employee, chooses to take extra shifts and work overtime on Friday’s. He doesn’t have to — he could leave at 5 p.m. if he wanted to, but on Monday when he receives his paycheck, he knows he’ll receive extra money from the overtime hours worked.