Exempt vs Non-Exempt Employee
Definition
A US classification under the Fair Labor Standards Act. Non-exempt employees must receive overtime pay for hours over 40 a week; exempt employees, meeting salary and duties tests, do not. Misclassification is a common compliance risk.
Related Terms in Payroll
Social Security Wage Base
The annual limit on wages subject to the Social Security portion of US FICA tax. Earnings above the base are not taxed for Social Security in that year, though Medicare tax continues to apply.
Imputed Income
The value of non-cash benefits provided to an employee that must be treated as taxable income — such as personal use of a company car or certain group-term life cover — even though no cash changes hands.
Pre-Tax Deduction
A deduction taken from gross pay before income tax is calculated, such as certain retirement or health contributions, which lowers taxable wages. Post-tax deductions are taken after tax is computed.
Payroll Accrual
Recording wages earned by employees but not yet paid at period end as an expense and a liability, so the cost falls in the period the work was done rather than when pay is disbursed.
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