To qualify as salary exempt under the Fair Labor Standards Act (FLSA) in the U.S., employees must typically be paid a fixed salary, earn at least $844 per week ($43,888 annually) as of July 2024 (increasing to $1,128/week or $58,656 annually on Jan 1, 2025), and perform specific executive, administrative, or professional duties. These roles involve high-level, independent judgment rather than manual labor.
Exempt employees do not receive overtime pay, as they meet the specific criteria for exemption under the FLSA. In most cases, exempt employees tend to be paid on a salary basis rather than an hourly basis. They also earn more than the FLSA minimum and perform certain exempt job duties.
The federal minimum salary for exempt employees (Executive, Administrative, Professional) is currently $684 per week ($35,568 annually) as of 2026, as a 2024 rule that would have significantly raised it was vacated by courts; however, many states, like California, have much higher requirements (e.g., $70,304/year in CA for 2026). States with stricter laws take precedence, so always check your specific state's rules, as they often base the threshold on state minimum wage multiples.
The "new rule" for salaried workers refers to the U.S. Department of Labor's (DOL) 2024 overtime rule, which significantly raised salary thresholds for exempt status (making more lower-paid salaried workers eligible for overtime) but was largely vacated by a federal court in November 2024, meaning the scheduled increases to $43,888 (July 1, 2024) and $58,656 (Jan 1, 2025) were blocked. While the original 2019 salary threshold of $35,568 ($684/week) temporarily rose to $43,888 in July 2024 before being blocked, the rule is currently on hold, with no new automatic triennial updates planned, and the existing $35,568 threshold largely remains in effect, though state laws (like California's) may have higher requirements.
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.
Exempt employees typically have positions where they have more responsibility, accountability, and influence in the company. They aren't watching a clock or counting down the minutes until they can leave for the day.
If a current nonexempt employee makes less than $43,888 annually (but at least $35,568 annually) and otherwise meets the test of a white-collar exemption, they can be reclassified as exempt in states where the federal threshold controls, noted Nisha Verma, an attorney with Dorsey & Whitney in Costa Mesa, Calif., and ...
Nonexempt employees are generally paid on an hourly basis and often hold jobs where the main duties center around repetitive or routine tasks. Some examples of nonexempt positions may include: Electricians, carpenters, and construction or maintenance workers in non-management positions.
If you are a nonexempt employee and report to work as scheduled, but your employer cannot provide enough work, you are entitled to at least two hours of pay, and up to four hours at your regular rate. This rule encourages fair scheduling and ensures employees do not lose income unexpectedly.
Tax-exempt status means your organization will not pay tax on certain nonprofit income.
To be considered an exempt employee in California, an employee must generally meet a strict duties test. For most exemptions, more than 50 percent of an employee's time must be spent performing exempt job duties.
Exemptions are often given for certain types of income, such as interest from government bonds or gifts received. There are also exemptions available for certain expenses. For instance, medical expenses or charitable donations. Income tax exemptions are available at both the federal and state level.
To qualify for exemption from federal withholding, you must have owed no federal income tax in the prior tax year and expect to owe none in the current tax year. Filing as exempt on a W-4 means no federal income tax is withheld from your paycheck, but Social Security and Medicare taxes will still be deducted.
What is an exempt employee? Employees exempt from the FLSA typically must be paid a salary above a certain level and work in an administrative, professional, executive, computer or outside sales role. The Department of Labor (DOL) has a duties test that can help employers determine who meets this exemption criteria.
Pros and Cons of Being an Exempt Employee
Steady salary: Exempt employees earn a fixed salary each pay period, regardless of the number of hours worked. This means they can rely on more consistent income than nonexempt employees whose wages can fluctuate from one paycheck to the next.
The main downside of being an exempt employee is not being eligible for overtime pay. However, for most employees, the benefits of exempt status likely outweigh the potential negative. U.S. Department of Labor.
There is no limit as to how many hours an exempt salaried employee can work in any given day or week. These employees earn a consistent salary, regardless of the number of hours worked.
Taxes are taken out the same way for both. That includes federal and state income tax, Social Security, and Medicare. The only difference is how much gets taken out, which depends on how much you earn during that pay period. So, hourly paychecks might vary more from week to week.
Higher income: Salaried jobs often pay more. You could earn a higher income, and you may have a higher. Growth opportunities: Salaried jobs are most often available in professional settings where you can grow and advance your career. Salaried positions also often have more responsibilities than hourly jobs.