Hiring an employee is a responsibility that requires adequate planning and decision on whether the new worker will be a full-time, exempt employee or not. Exempt employees are given higher levels of responsibility and greater decision-making authority. There are both advantages and disadvantages to hiring full-time exempt employees.
Understanding who is a full-time exempt employee and how they affect your workforce is essential. That’s what we are going to discuss in this blog.
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What Is An Exempt Employee?
Exempt employees are not required to follow a work schedule or shift. That makes a full time exempt position so lucrative for candidates, as they can work on certain days of the week. As full-time exempt employees are ‘exempted’ from fixed work schedules, they can work as much or as little to fulfill their responsibilities.
Including such staff in your workforce introduces a challenge because the management can’t decide their schedule. Such employees have the autonomy to determine their schedules. Full-time exempt are salaried employees who are paid a monthly or annual salary.
How does Fair Labor Standards Act (FLSA) classify an exempt employee in the USA?
The Fair Labor Standards Act (FLSA) has defined clear conditions for exempt employees in the USA. Such employees are not regulated under the Fair Labor Standards Act, essentially allowing employers to not adhere to the overtime pay and minimum wage federal requirements.
Here are the factors FLSA has based the classification of a full-time exempt employee:
1. Based on salary level
Salaried employees can be exempt only if they earn a full time exempt salary of at least $684 per week or $35,568 annually. Any worker in your workforce earning less than $648 per week cannot be exempt.
2. Based on the salary base test
Another difference between full-time exempt and nonexempt is the salary base test. A full-time exempt employee’s salary is not subject to reduction under any circumstances, including poor performance-related decrease.
3. Based on Duties performed test
Under the duties performed test criteria, an employee must work in executive, professional, administrative, outside sales, or roles to qualify as full-time exempt.
This test does not consider the job title; here, the employee’s job tasks supersede their title. Even if their titles do not have these words, but their tasks fall into these categories, they can be exempt.
Understanding the advantages and disadvantages of hiring an exempt employee for your business
Hiring full-time exempt employees comes with its own set of advantages and disadvantages. You must know the pros and cons to make an informed decision. Let’s break down the advantages and disadvantages of hiring exempt employees.
Here are the advantages you must know.
Exempt employees often have more flexibility in their work schedules. As such, staff is not required to adhere to strict hours and can usually manage their time to meet job goals and deadlines; managers don’t have to create work schedules.
2. No overtime
Employers don’t have to pay overtime to full-time exempt staff, no matter how many hours these employees work per week. The full-time nonexempt workers must be paid 1.5 times their usual pay rates as overtime for more than 40 hours a week. This is why overtime can be a significant savings for employers for hiring exempt staff.
3. Higher skills
Exempt employees are typically highly skilled and are experts in their field. They are an excellent asset for your business and offer higher output than their nonexempt counterparts. If your organization requires highly skilled staff, then a full-time exempt route may be the best option for cost savings.
4. Job dedication
As exempt employees have a highly flexible work schedule, they have a better work-life balance, which is why they tend to have a higher level of commitment to their roles. As they work when they are most productive, they are invested in achieving results and contributing to the company’s success.
5. More productive due to autonomy
A full-time exempt employee has more autonomy in decision-making and problem-solving. This makes them more productive and innovative in their roles.
You can also give them more responsibilities, such as business mergers and delivery deadlines. You can ask them to work longer hours when needed without expecting to pay overtime.
It would help to consider specific challenges when expanding your workforce with full-time exempt staff.
6. Higher costs
While you save on overtime, exempt employees are typically paid a fixed salary. You have to hire them at a higher salary because of their expertise and experience. This can lead to higher labor costs than nonexempt employees who work regular hours and overtime.
7. No deductions
Even if the exempt employees are not working at least 40 hours a week, you still cannot deduct their pay. In other words, sometimes you will pay them more than the hours worked. Furthermore, although exempt employees are not entitled to overtime pay, some might expect it for working longer hours.
8. Burnout risk
Sometimes employers exploit the long hours of work routine for exempt employees as there is no overtime obligation. It can increase the risk of burnout among exempt employees, negatively affecting their productivity and well-being.
9. Potential for misclassification
Given the complexity around the classification of a full time exempt position, it is very much possible that companies need help to correctly classify employees as exempt or nonexempt based on their job duties and responsibilities. Misclassifying employees could lead to legal and financial consequences.
How to determine if your business requires a full-time exempt employee/employees?
To determine whether you need full-time exempt employees, you must carefully evaluate your company’s needs, workload, and available resources.
Start by identifying the specific business tasks and responsibilities that are critical. If these tasks can be managed by part-time or temporary staff, there is no need for full-time exempt staff.
However, some tasks have complexity that requires a higher skill level, experience, or specialized knowledge. Such employees can be exempt if the role provides flexibility in schedule or demands availability outside of regular hours. Finally, consider the budget constraints to decide if you can afford the salary and benefits of a full-time exempt position.
Tips for Hiring Full-Time Exempt Employees
Clearly define the qualifications, experience, and skills required for the full-time exempt position. It will get suitable candidates for the position.
Pay attention to candidates’ soft skills, such as communication, teamwork, adaptability, and leadership potential. These are essential qualities for exempt positions as they require autonomy.
Full-time exempt employees are highly skilled and experienced. It would help if you prepared a competitive and attractive compensation package, including salary, benefits, and additional perks to get eligible resumes.
Advantages and disadvantages for employees
Being a full-time exempt employee offers several benefits but with challenges. That’s why employees must consider both when applying for a position.
1. Consistent income
As a salaried employee, you will receive steady pay without any risk of deductions.
2. Higher positions
Often higher positions are made full-time exempt, so being a full-time exempt employee will get you better pay and an advanced role in the company.
As a salaried exempt employee, you can manage your work schedule and tasks. On the downside, here are some disadvantages of a full-time exempt position.
4. No overtime
Irrespective of how long you work, you are not entitled to overtime as an exempt employee.
5. Low motivation
The security of a fixed salary can nurture complacency, and full-time exempt employees may need more motivation to better their performance.
You may have to include full-time exempt employees to ensure your business operations run smoothly and efficiently. It requires understanding the advantages and disadvantages of such positions and managing compliance in pay, attendance, and overtime accordingly.
A workforce management software like Truein can significantly facilitate the management of a full-time exempt workforce. It’s a complete attendance and time-tracking solution offering 70+ policy templates to manage different types of employees. Know more here.
1. How many hours an exempt employee should work per week?
Exempt employees are not subject to federal or state overtime pay regulations, so they can work as little or as extra as required to complete tasks.
2. What is exempted and non-exempted employee?
An exempt employee is a salaried worker exempt from specific provisions of labor laws, such as overtime pay. They generally don’t get overtime but have higher positions and better pay than full time non exempt employees.
Nonexempt employees are typically paid hourly and entitled to overtime pay for hours worked beyond the standard 40-hour workweek. They are governed by the labor laws regulated by the FLSA.
3. What is the difference between full time exempt and nonexempt employees?
The primary difference between exempt and nonexempt employees is their eligibility for overtime pay. Exempt workers are not entitled to overtime pay, while nonexempt employees receive overtime. Also, full-time exempt positions are salaried, while nonexempt is paid hourly.