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Time Tracking 101: Exempt vs Nonexempt Employees

Time Tracking 101: Exempt vs Nonexempt Employees

It’s no secret that finding a new employee for your small business is both time consuming and stressful. In today’s tight labor market, 45 percent of small businesses found few or no qualified applicant for their job opening. However, once you do hire that employee it is important to make sure you are correctly recording their hours.

Tracking your employees’ time spent working is one of the most integral parts to running a small business. It ensures that your employees are paid accurately and on time. More importantly, it allows you to maintain a record of hours and helps you stay compliant. As many small businesses have a mix of both full-time and part-time workers, it can be tough to differentiate the regulations each may require. For example, which employees or exempt and which are nonexempt from the Fair Labor Standards Act?

We’ll explain each below, as well as why the distinction important to time tracking, and how you can easily stay on the right side of the law.

To read our full Time Clock article, click here.

Who sets the federal time tracking standard?

The Fair Labor Standards Act (FLSA) is a federal labor law of general and national application that covers overtime rules, minimum wage laws, child labor laws, and the equal pay act. The FLSA requires overtime compensation at time plus one-half per hour over the 40-hour threshold per week for nonexempt employees.

Some government and medical employees may have different thresholds. Keeping accurate record of nonexempt employees’ hours through cloud-based time tracking systems ensures that they are paid the correct amount that can automatically adjust their pay to reflect any overtime worked.

Exempt vs. nonexempt employees.

It is important to know the difference between an exempt and nonexempt employee. The terms exempt and nonexempt refer to whether the employee is exempt or nonexempt from FLSA rules. Exempt employees may be paid a salary by their employer rather than an hourly wage. According to Monster.com, exempt employees are typically executives, supervisory, professional or outside sales positions. An employee’s salary is also a part in determining whether they are exempt or nonexempt.

In May 2016, the DOL under President Barak Obama attempted to significantly raise the minimum salary required for overtime regulation. Set back in 2004, the overtime rule exemption is $23,600 annually, or $455 a week. Obama’s ruling stated that the overtime rule exemption would be $47,476 per year, or $913 a week. The overtime ruling was delayed until March 2019, where President Trump is expected to propose a new threshold between $32,000 and $35,000.

Companies may require nonexempt employees to clock in and out to make sure that they are being paid fairly. The records produced by an automated time and attendance system can be used if the company is audited or confronted with a wage and hour dispute claiming violation of FLSA standards. Don't have a time and attendance system? PrimePay has you covered.

Stay compliant with PrimePay's Time Clock system. 

Time clock systems are integral to any business operation. PrimePay’s Time Clock, when integrated with Online Payroll, significantly decreases the time spent manually managing employees’ time. PrimePay offer’s four different Time Clock options to have the best fit for your small business needs.

To read our full Time Clock article, click here.

For a full comparison of PrimePay’s different Time Clock models, click here to download our PDF. For more information regarding our Time Clock systems, click here to learn more.