For HR and Compensation leaders, ensuring role classifications align with both legal requirements and organizational intent is more than compliance. It is foundational to pay equity, employee experience, and risk mitigation.

Hourly vs. Salaried

Hourly employees are paid for the exact time they work. They track hours and are usually eligible for overtime.
Salaried employees are paid a fixed amount each pay period, regardless of hours worked. But not all salaried roles are exempt from overtime and that’s where confusion begins.

Exempt vs. Nonexempt (under the FLSA)

Exempt employees are not entitled to overtime. To qualify, they must meet three federal tests: (1) Paid on a salary basis, (2) Earn at least the minimum salary threshold, and (3) Perform exempt duties (executive, administrative, professional, etc.).
Nonexempt employees must be paid overtime for hours worked beyond 40/week (some states have daily thresholds too).

So, what about Salaried Exempt vs. Salaried Nonexempt?

Salaried Exempt: These employees meet all FLSA exemption criteria. Their salary covers all hours worked, and no overtime is required. Think managers, professionals, and higher-level roles.
Salaried Nonexempt: Paid a set salary but still eligible for overtime. Their hours must be tracked, and overtime must be paid when it is due. This is common in retail, healthcare, or certain field roles where duties don’t meet exemption standards, but salary provides consistency.

Employers: Misclassification is costly both financially and reputationally.

Best practice: Conduct regular audits, especially when job responsibilities evolve. As pay transparency laws expand and scrutiny increases, precision in classification isn't just about the DOL. It is about trust and compliance.

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