Making Sense of Hourly vs. Exempt

It’s a simple question with a not-so-simple answer: hourly or exempt? We wanted to share a clear, practical overview to help guide your decisions.

The Basics

Under the FLSA, most employees must receive minimum wage and overtime (1.5x) for hours worked over 40 in a workweek.

• Nonexempt (hourly): Eligible for overtime

• Exempt (salary): Not eligible for overtime, but only if they meet specific criteria

Any role can be nonexempt. To classify a role as exempt, it must qualify under an exemption—most commonly the Executive, Administrative, or Professional (EAP) categories.

The 3-Part Test for Exemption

Most roles need to meet all three:

• Duties: The actual job responsibilities meet exemption requirements

• Salary level: Meets the minimum set by the Department of Labor

• Salary basis: Paid a consistent salary regardless of hours worked

If any of these aren’t met, the role should be classified as nonexempt.

Pros & Considerations

Nonexempt (Hourly)

• Clear overtime rules and pay transparency

• Flexibility for variable schedules

• Requires time tracking, can lead to higher overtime costs, and off-the-clock work can create compliance risk

Exempt (Salary)

• Predictable payroll and more flexibility in scheduling

• Works well for leadership and professional roles

• Must meet strict criteria, and pay reductions are very limited

A Few Practical Pointers

• Always base classification on actual duties, not job titles

• When in doubt, nonexempt is typically the safer route

• Be consistent. Similar roles should generally be classified the same way.

We’re Here to Help

If you’d like help reviewing job descriptions, pressure-testing classifications, or just talking through a gray area, we’re happy to help. These decisions are easier (and safer) when you have a second set of eyes.

This information is intended for general guidance and is not legal advice.