Here at CaptureLeave, we offer vacation tracking software solutions for small and mid-sized organizations. A big area of discussion we frequently hear about when talking with our clients is how to manage time off scheduling and other similar issues for exempt employees. The following provides an overview of what exempt employees are, and what employers should know, especially as it vacation time for exempt employees. 

Exempt vs. Nonexempt Employees

Exempt and nonexempt employees have some pretty big differences, and a lot of employees might not necessarily even know some of the more specific details of what these terms mean, especially in smaller businesses that don’t have a dedicated HR department.

The Fair Labor Standards Act requires that employers classify jobs as either exempt or nonexempt, and nonexempt employees are covered by the FLSA, while exempt employees aren’t.

Exempt employees are excluded from many of the rights and protections nonexempt workers receive, including when it comes to minimum wage and overtime laws. The employer pays employees a salary instead of an hourly wage, and in most businesses only the professional, supervisory, executive and outside sales positions are exempt.

Nonexempt employees, on the other hand, aren’t exempt from the requirements of FLSA. Employees who fall into the nonexempt category have to be paid at least the federal minimum wage for every hour they work. If a nonexempt employee works overtime, it has to be no less than 1 ½ times their hourly rate, for every hour they go beyond 40 in a work week.

Specific differences between an exempt and nonexempt employee include:

• One of the main differences between an exempt and nonexempt employee is how overtime is handled. An exempt employee works as many hours as needed to complete their workload, and compensation isn’t based on how much they work, or the hours they’re in the office. If an exempt employee works 60 hours in a week, they’re still going to make the same salary. This is in comparison to nonexempt employees, who are paid
• Nonexempt employees have more worker protections under federal law, but most employers will follow similar guidelines for both classifications of employees. For example, even though exempt employees aren’t necessarily covered under the Family and Medical Leave Act, most employers still provide those protections to exempt employees.
• In most states, both exempt and nonexempt employees can collect unemployment benefits.

For exempt employees, one of the biggest perks of this kind of employment contract is the freedom and flexibility they’re often afforded. For example, an exempt employee might be able to come in later or leave for the day when they feel like they’ve completed their work, while nonexempt employees have to follow set schedules. Nonexempt employees also tend to have more direct supervision and management, while nonexempt employees have more freedom and autonomy.

Vacation Time for Exempt Employees

One area where a lot of employers have questions is how to handle vacation time for exempt employees.

First, some employers do say they have problems with exempt employees and vacation time because these employees have the misconception that if they check emails for a few minutes a day while they’re away, it doesn’t count as vacation time.

For exempt employees, some employers have put in place policies that indicate if they’re not physically in the office, it’s counted as vacation time. Of course, this can get a bit sticky if exempt employees are allowed the option to work remotely.

To avoid some of the problems that can come with managing vacation time for exempt employees, the best option is often to make sure all policies are up-to-date and are realistic and accurate. If an employer sets expectations, it clears up confusion, or the potential that exempt employees could take advantage of the system. Also, if at your workplace you feel like exempt employees need to check in and keep up with their emails at least once a day, even while on vacation, that’s something that should be outlined as a specific expectation in the company policy.

Even though it’s important for employers to create clear and defined vacation policies and time off policies, there are no laws requiring employers provide paid vacation or holidays to exempt employees, no matter how big or small the company. Private employers aren’t even required to provide unpaid time off for vacations or holidays.

The Family and Medical Leave Act (FMLA) only dictates that employers with at least 50 employees give unpaid leave to employees who meet certain standards.

SHRM Sample Policy for Exempt Employee Vacation Time

SHRM put together a guide for vacation time for exempt employees, and some tips they include are:

• Many companies will offer their exempt employees the opportunity to accrue vacation time on a weekly basis. The SHRM outlines different ways to do this, including offering a rate of 1.69 hours per work week from the date of hire to the fifth-year anniversary of the employee, which would be equal to around 11 days per anniversary year of employment. Then, from there that could go up based on how many years the employee continues to work at the company.
• If conflicts do arise (although many can be solved with the use of a vacation tracker or self-service leave management system), employers can base preference on the employee who’s worked for the company the longest, or they can go with whoever makes the request first. Some employers might base it on seniority instead, or the amount of time already taken by the employees with conflicting requests.
• Most employers should require that employees submit their requests at least a week in advance, and some employers may find that it’s better to ask for more advance notice.
• Employers have to decide how they’ll deal with their employees’ unused vacation time. For example, an employee might accumulate the time up to a certain point, but then there may be a cutoff for their ability to accrue any additional time until their initial time is used.

The takeaway from all of this is first that employers need to stay organized when it comes to managing exempt and nonexempt time off with the use of a modern, streamlined leave management system. Beyond that, while there aren’t a lot of federal laws dictating how things like paid vacation time are handled for either set of employees but especially exempt employees, it’s up to employers to create policies that are fair, effective and thoroughly conveyed to employees.