Determining whether your new employee is eligible for things like overtime pay or other benefits is unfortunately not as simple as looking at whether they are compensated on an annual or salaried basis. The rules are dictated under the Fair Labor Standards Act (FLSA) and most jobs fall under this act. From the Department of Labor, "The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments."
To start with, non-exempt employees must be paid at least the minimum wage (which can vary by state and even city). In addition, they must be compensated for any time they work beyond 40 hours.
So, when does an employee become exempt?
There are a series of tests you should run based on role type and if you are ever uncertain, seek out professional legal advice.
At a high level, an employee will usually be considered exempt if they meet all of the requirements below.
- They make more than $23,600 a year or $455 a week
- They are paid on a salaried basis
- They perform "exempt-level" job duties the majority of their working time.
Ultimately, there is no better place to consult for questions around the FLSA than the Department of Labor's own materials. We've provided links to some of the most helpful below. In addition, don't forget to consult your state's information as things like pay rate may vary.