California’s booming technology industry is one reason the state’s employment rate is on the upswing. As the owner of a technology company, you frequently hire new workers to fill computer-related positions and meet the demand of a growing industry.
When hiring, you must determine if an employee is eligible for overtime pay. If not, they’re considered exempt. Knowing how to classify an employee as exempt or nonexempt can prevent future legal issues, and you can keep your business running smoothly.
How do exempt and nonexempt employees differ?
The Fair Labor Standards Act (FLSA) sets a minimum wage government and private industry jobs must pay their workers. They also establish rules for employees working overtime, which is more than 40 hours in a week. For each additional hour a nonexempt employee works after the typical 40-hour workweek, they must earn at least one a half times their regular hourly rate.
Employees classified as exempt do not receive overtime pay and usually have more responsibilities than nonexempt employees. They also typically work in specific professional fields. This includes business executives, administrative roles and outside sales representatives. Your employees working in computer-related occupation may also be exempt.
Three reasons an employee working a computer-related position is exempt
The United States Department of Labor states people working computer-related jobs can be exempt from minimum wage and overtime pay. Roles that are typically exempt include computer systems analysts, computer programmers and software engineers. An employee must also meet the following qualifications to be exempt:
- Earn at least $455 weekly if it's a salaried position.
- Receive an hourly pay of $27.63, if not salaried.
- Work on tasks related to system analysis and testing, as well as modifying computer programs.
When you own a technology company, you should know when to classify your employees as exempt. If your employee handbook and classifications comply with regulations, it could make owning and running your business free of legal obstacles. Conversely, incorrectly categorizing your employees as exempt could lead to a legal battle.