How do businesses classify employees?

Businesses classify employees by analyzing the core responsibilities of each role, the required skills and experience, and the level of decision-making authority. Comparing roles to industry standards and conducting regular evaluations ensures classifications remain accurate as job duties evolve with the business.

What are the common types of job classifications in the workplace?

The primary classifications include exempt employees, who typically hold executive, administrative, or professional roles and aren't entitled to overtime, and non-exempt employees, who must receive overtime pay for hours worked beyond 40 per week. Other classifications include full-time vs. part-time status and employee vs. independent contractor distinctions.

How do job classifications impact wages, benefits, and taxes?

Job classifications determine how employees are paid and taxed, as well as the benefits they receive. Exempt employees can be salaried with no overtime, while non-exempt employees earn hourly pay and overtime for hours worked beyond 40 per week. Benefits eligibility—such as health insurance, retirement plans, and paid leave, often depends on classification, and tax withholding rules may vary between employees and independent contractors.