Organizational Wellness

Classification of Employees: A Guide for HR Departments

Apr 18, 2023

Last Updated Sep 29, 2023

Companies have various employment types, as different roles have distinct needs. A marketing company, for example, might have a full-time project coordinator, a part time graphic designer, and a contractor running its Instagram account.

Accurately classification of all of these employees is important to make sure your colleagues receive the pay and benefits they’re entitled to. It also keeps your company compliant with legal regulations, protecting your organization from an unnecessary liability exposure.

As a human resources professional, it’s good practice to evaluate your employees’ hours, duties, and responsibilities to make sure they are classified correctly. Here’s a basic overview of the different employee types, how to tell them apart, and what your organization’s obligations are to each type of employee.

Exempt vs. Non-Exempt Employees

It’s important to understand which employees are subject to the wage practices laid out in the Fair Labor Standards Act (FLSA), known as non-exempt employees, and which ones are not, known as exempt employees. This classification shapes what payment practices are required from your organization.

Exempt employees: These employees are not subject to the minimum wage and overtime terms of the FLSA. Generally, exempt employees receive a fixed salary regardless of how many hours they work or how productive they are, so they are exempt from receiving time-and-a-half for overtime hours. To qualify as an exempt employee, they must meet specific criteria set forth by the FLSA, which includes: earning at least a specified amount of money, performing executive, administrative, or professional job duties, and having specific responsibilities as outlined in the law.
Non-exempt employees: These employees are subject to the minimum wage and overtime conditions of the FLSA and must be paid for all hours worked over 40 in a week or 8 hours in a day. Generally, these employees are paid an hourly wage or a salary based on the number of hours worked. Overtime is calculated at one-and-a-half times the standard rate of pay.

To comply with the FLSA, employees eligible for overtime must complete a time and attendance record or timesheet. Violating FLSA laws can result in criminal prosecution and monetary penalties for employers.

Full-time

Full-time employees (also called permanent employees) usually work 40 hours a week for an indefinite period of time. The 40-hour work week is the hours cap set by FLSA, but employers aren’t required to reach that number. Some companies may consider 37.5 or even 32 hours per week full-time, especially those operating with a four-day work week.

This is among the most common employment set-up, and full-time workers constitute 70% of the workforce. They can be paid hourly or on a salary basis, and are eligible for employer benefits like healthcare, paid time off, and 401(k) savings. U.S. companies with more than 50 full-time employees must offer certain required benefits like health insurance for employees and their dependents.

Full-time employees qualify as exempt when their job is permanent and they are paid a salary of at least $35,568 yearly (or $64,480 for California employees as of 2023) . If an employee is non-exempt and works more than 40 hours within a week, they must receive overtime pay that’s at least 1.5 times their regular pay.

Part-time

Part-time employees usually work less than 30 hours a week and are paid hourly. They are often employed on an ongoing basis like full-time workers, but employers are not required to offer part-time employees benefits like health insurance or time off.

Most part-time employees are considered non-exempt, so they qualify for FLSA benefits like overtime pay if they work more than 40 hours in a week.

Contract

Contract and temporary employees are people who get hired to do a particular job for a specific period of time. Temporary workers can be hired either directly by the employer or through a staffing agency. Construction workers are a common example (which is why you’ve probably heard them called “contractors”), but many jobs can be done on a short-term basis. Seasonal retail workers are another example of contract employees.

Temporary employees can work full-time or part-time and generally don’t receive employer benefits like health insurance and PTO. They are considered non-exempt because they usually earn less than $35,568 annually per contract.

Independent Contractor

Independent contractors (also known as freelancers, contingent workers, or 1099 workers) work for a set amount of time, often doing specialized work. They are neither exempt or non-exempt because they are not considered company employees — they are business owners. FLSA and employer benefits do not apply to independent contractors.

On-call

An on-call employee is expected to be available at specific times. Some examples include people who take care of others, security guards, and technical support workers. On-call workers get paid by the hour and are considered non-exempt because they usually make less than $35,568 annually.

Intern

An intern is a person who works for a company or organization, usually for a short amount of time. Interns are often high school or college students trying to gain work experience. They can be paid or unpaid — as long as the intern is the “primary beneficiary” of the arrangement. Internships can sometimes lead to permanent employment with the company.

Volunteer

Volunteers are unpaid workers.The U.S. Department of Labor (DOL) has rules about volunteer workers your organization should be aware of. People can only volunteer in certain places, like non-profit organizations. Since volunteers do not get paid for their work, they are neither exempt nor non-exempt.

A Happy, Healthy Workforce

Whatever their classification, it’s important to keep your workforce healthy and engaged — and a competitive benefits package is key.

In a 2021 survey, 70% of employees said they would consider leaving their current job for a company offering more comprehensive benefits and resources to reduce burnout.

Incorporating a wellness program into your benefits package can improve the health of your employees and your company. Nearly 90% of businesses that tracked spending on employee wellbeing saw a clear return on investment through increased employee engagement, customer satisfaction, and profitability.

Talk to a wellbeing specialist today to learn how to establish a wellness program.

Resources

Fair Labor Standards Act (FLSA). Office of Financial Management. Accessed March 28, 2023 from https://ofm.wa.gov/state-human-resources/compensation-job-classes/compensation-administration/fair-labor-standards-act-flsa-washington-minimum-wage-act-wmwa/fair-labor-standards-act-flsa.
Fair Labor Standards Act Advisor, U.S. Department of Labor. Accessed March 28, 2023 from https://webapps.dol.gov/elaws/whd/flsa/docs/volunteers.asp.
Greenhouse, Steve. Temp Workers At Microsoft Win Lawsuit, Dec. 13, 2000. The New York Times. Accessed March 28, 2023.
Work Experience of the Population 2021, Dec. 8, 2022. Bureau of Labor Statistics. Accessed March 28, 2023 from https://www.bls.gov/news.release/pdf/work.pdf.
Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act. U.S. Department of Labor. Accessed March 28, 2023 from https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships.
Sheppard, Grace. When Vacations Aren’t Enough: New Visier Survey Finds 70% of Burnt Out Employees Would Leave Current Job, Visier. Accessed March 28, 2023 from https://www.visier.com/blog/new-survey-70-percent-burnt-out-employees-would-leave-current-job/.
Four Critical Steps You Need to Take to Promote Employee Wellness and Maximize Engagement, BrightPlan. Accessed March 28. 2023 from https://www.brightplan.com/webinar/four-critical-steps-you-need-to-take-to-promote-employee-wellness-and-maximize-engagement.