Business

Understanding the Different Types of FLSA Classification

When hiring and managing employees, your employees must be appropriately classified according to the Fair Labor Standards Act (FLSA). The proper classification protects an organization from the potentially damaging repercussions of an audit. So what is the FLSA status, and how to correctly classify your employees without confusion?  Read the article in full to understand the classification types.

FLSA Status

Different FLSA Classification Types

There are some fundamental definitions you must know to understand the classifications for your employees adequately. The U.S. Department of Labor defines these classification as:

FLSA Exempt

Exempt or salaried employees refer to employees not entitled to minimum wage or overtime wage protections. The salary amount for these employees is determined on a weekly, monthly, or annual basis.

FLSA Non-Exempt

A Non-Exempt employee, on the other hand, will be entitled to minimum pay and overtime protections under the FLSA. These employees are generally paid a base hourly rate. You may also refer to them as “hourly” employees.

Salary

It refers to an employee whose salary is predetermined. It will be a fixed amount that covers all or part of the compensation for the pay period thAT comes under this classification. The salary is not subjected to the quality or amount of work. The wage can be denoted as an amount per week, month, or year. According to regulations part 541, you must pay your employees a minimum required salary of $455 each week, and it excludes “board, lodging, or any such facilities.”

Salaried Non-Exempt

In certain situations, an employee is engaged to work a certain number of hours per week and will be paid a fixed salary for it. If the employee logs in additional time, they will be eligible for overtime pay for the extra hours worked. This overtime pay is calculated by determining the employee’s average hourly pay and then multiplying it by 150 per cent.

The present minimum wage laws mandate that the employees earn at least $455 per for working overtime. Even if the employee meets these minimum requirements, he or she may not be automatically exempt. The employee is also required to meet at least one of the exemptions outlined in the standard duties test. The details are given below.

FLSA Exempt Tests

To determine your employees’ FLSA status, you can administer the following tests:  salary level,  duties, and a salary basis test.

Salary Basis Test

This test ensures that the employee earns a predetermined fixed salary, which will not get reduced based on the quantity or amount of work. An employee needs to earn a minimum amount specified to qualify for this exemption.

The U.S. Department of Labor (DOL) rules may require an employee to be paid no less than $455 per week to qualify for an exemption on a salary basis. However, these requirements do not apply to teachers, outside sales employees, and employees practising in the field of law or medicine.

Salary Level Test

The salary level test is employed to determine if an employee earns the minimum specified amount required to qualify for the exemption. Employees who are paid less than $23600 per year are exempt. But be informed that this number is subject to change and may be higher depending on your state’s regulations.

Job Duties Test

It is not enough that an employee who meets the salary level test criteria and salary basis test is exempt. The employee also has to perform exempt job duties. The employee’s primary job duties test must meet all the Department of Labor (DOP) regulations. The term “Primary duty” means the principal, major, or most important duty that the employee performs. The employee’s primary duty is based on all the facts in their particular case, emphasizing the nature of the employee’s job.

Department of Labor(DOP) clearly states that the job titles do not determine the exempt status, but the roles and tasks assigned as part of the job must be evaluated in order to make the right determination.  Typical categories of exempt job duties are executive, professional, and administrative.

Determining what is the FLSA status of employees could make any company operating in the United States oblige and follow the current FLSA classification rules. And avoid running into legal troubles in the future. But many businesses get the classification wrong because of its tedious nature and wrong information. The above article should give you a basic understanding of the basic rules governing the FLSA classification.

Simultaneously, you need to follow the right procedures to track and monitor your workforce to stay compliant. That’s where you can invest in an automated employee time tracking system with facial recognition, time calculator, and other such features to monitor them effectively.

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