Employment classification is important because it gives companies the ability to compensate workers justly, in regards to job title, duties, and how difficult their role is. It also helps define benefits and company policy. Additionally, when employee classification is done right, it fosters positive employer-employee relationships and helps companies follow the Fair Labor Standards Act (FLSA) and other important regulations. Learn more about how to create employment classifications within your organization, employment classification best practices, and more.
What is Employment Classification?
Employee classifications categorize employees in terms of hours, duties, benefits, and retirement. Employees can be classified in several ways, including non-exempt vs. exempt, temporary and regular, and more.
How to Create Employment Classifications in Your Workplace
When it comes to classifying your employees, there are three ways to do so. The three categories of employment classification are:
- Job Duties: When it comes to employee classification, exempt vs. non-exempt is a important place to start. So, which employees are exempt under FLSA? Salaried employees who are not eligible for overtime pay are considered exempt. Non-exempt employees are paid by the hour. It’s important for your employees to know whether they are an exempt or non-exempt employee so they can understand their pay and benefits accurately.
- Number of Workweek Hours: The number of hours an employee works a week defines whether they are a full-time or part-time employee. While there is no set rule on what qualifies employees as full-time or part-time by the FLSA, as a rule, full time employees are regularly scheduled 40 hours of work a week, while part-time employees have 30 or less hours per week.
- Length of Job Duration: Job duration categorizes employees as permanent, temporary, or special. Permanent employees are hired to work for an indefinite time period and temporary and special employees are hired to work a specific set time period.
Employee Classification Categories
Based on the ways to create classification types, there are different types of classification your employees can be considered as. These classification types include:
- Full-time employee
- Part-time employee
- Part-time excluding benefits
- Special classes
Learn more about each type of classification of employees below.
There are two types of full-type employees: regular and temporary.
Regular full-time employees are hired to work 40 hours per week for an indefinite period of time. If eligible, these employees can receive their employer’s benefits via their company plan.
Temporary full-time employees are schedule to work at least 40 hours a week for 90 days or less. If the manager approves, they can be hired to work for another 90 days at maximum. If the employer wants to extend this employee’s contract after that, they will need to be given full-time status. If a temporary full-time employee competes 1,000 hours of work, they can then become eligible for the employer’s benefits plan.
Like full-time employees, there are two types of part-time employees: regular and temporary. Regular part-time employees are employees who work less than 40 hours per work week but are hired for an indefinite period of time.
Temporary part-time employees work less than 40 hours for 90 days or less. These employees can be contracted for another 90 days but will need to be changed to a regular part time employee or be let go if the manager wants them to work additional time after the 180 days.
Part-Time Employee Excluding Benefits
There are a few types of classifications that do not receive benefits. These employment classifications are regular excluding benefits and temporary excluding benefits.
A regular excluding benefits employee works fewer than 20 hours per week for 90 days or less. Their employment cannot be extended.
Temporary excluding benefits employees are people who are hired on either regular or irregular schedules and who work less than 20 hours a week. Their contract lasts a maximum of 90 days, and the employer cannot add additional time to their contract.
When an employee doesn’t fit any of the above categories, they are a special class. There are several types of special classes, including:
- On-Call Employee: These are employees that are hired on an as-needed basis and are hired for an indefinite period of time. They can be employed as an on-call employee for 180 days at most. If the manager wants to hire them for longer, the employer must make a formal request to extend their contract. On-call employees cannot work more than 400 hours during the 180-day timeframe and are not eligible for the employer’s benefit plan.
- Interns: Interns work for a specific, short period of time for academic or training reasons. Usually, interns are not eligible to join the employer’s benefit program.
- Freelancers/Independent Contractors: These employees are employed for a specific period of time and are used to perform specific tasks.
Employment Classification Best Practices
When employment classification is done right, it can optimize employer-employee relationships, create clear expectations within the workplace, help you avoid legal risks, and more. Below are a few top employment classification best practices:
- Create employment classifications by following federal and state laws. For example, learn how you state and federal law defines temporary or regular employment and keep in mind overtime and minimum wage.
- Consider informing employees of their eligibility for part-time work in advance. If possible, employees can get authorization from their superiors before working overtime to allow them to prepare for the increased overrun and avoid conflicts over benefits.
- Ensure that contracts are in line with employee job duties. For example, if you have an employee who does work as a full-time employee but you classify them as a independent contractor in legal documents and have them fill out an 1099 rather than a W-2, you as an employer can get caught in legal trouble.
FAQs on Employment Classification
Why is job classification important?
Employment classification is required by labor laws in order to ensure job assignment is fair and in line with job duties and benefits. It also helps ensure that employees are compensated based on their responsibilities of their position.
Which employment classifications does FLSA law govern?
The FLSA controls minimum wage, overtime pay, recordkeeping, and child labor statuses for exempt and non-exempt employees.