Employers must classify an employee’s job as either Exempt or Non-Exempt as required by The Fair Labor Standards Act (FLSA).
What makes these employees different?
The difference is the way the employees are compensated and how their positions are structured.
Exempt employment positions are excluded from minimum wage, overtime regulations, and other rights and protective measures that are provided to non-exempt workers. Exempt employees receive a salary rather than an hourly wage.
An example of an exempt position is a professional or an executive position.
Non-Exempt employees are not exempt from FLSA requirements. In this category, employees must be paid at least the federal minimum wage for every hour worked and given overtime pay not less than one-and-a-half times their hourly rate for hours worked beyond 40 during a week.
Regardless of what “status” the employee falls under, there is not a difference in how they are taxed. All income is “earned income” and taxable based on the individual’s tax bracket.