Exempt or Non-exempt?

Classifying exempt and non-exempt church employees is just as crucial as distinguishing between independent contractors and employees. Generally, this involves a straightforward separation between salaried (exempt) and hourly (non-exempt) employees, but that is not the only criterion.

Organizations must adhere to the Fair Labor Standards Act (FLSA) guidelines to determine the classification of each employee. Accurate classification is essential as it affects both employee and employer tax obligations. It may be helpful to consider every employee as non-exempt unless they qualify for exemption based on the criteria discussed below.

To be considered exempt from minimum wage and overtime provisions, employees must:

1. Qualify for at least one of the U.S. Department of Labor (DOL) exemption categories, which are based on job duties test criteria; and

2. Meet the minimum salary requirement, which is currently $35,568 per year ($684 per week).

The exemption categories commonly applicable to church employees, along with their job duties test criteria, are referred to as the executive, administrative, or professional exemptions (also known as the “EAP exemptions” or the “white-collar exceptions”). The duties related to each of these exemption classifications are summarized below. Please refer to this DOL fact sheet for a complete list of the exemption classifications and their corresponding job duties test criteria.

Executive:

• Manages either the organization or a department/subdivision of it;

• Customarily and regularly directs the work of at least two other full-time employees; and

• Has the authority to hire or fire other employees or influence decisions regarding hiring, firing, or promotion of other employees.

Each of these elements must be satisfied for an employee to qualify for exemption as an executive employee.

Administrative:

• Performs office or non-manual work directly related to management or business operations of the organization or its clients; and

• Exercises discretion and independent judgment on matters of significance.

Both of these elements must be satisfied for an employee to qualify for exemption as an administrative employee.

Professional:

• Performs work requiring the consistent exercise of discretion and judgment and advanced knowledge, acquired through prolonged specialized intellectual instruction, within a field of science or learning; or

• Performs work requiring invention, imagination, originality, or talent in a recognized creative or artistic field.

An employee can satisfy either of these elements to qualify for exemption as a professional employee.

Computer Employee:

• Employed as a computer systems analyst, computer programmer, software engineer, or similarly skilled worker in the computer field performing duties defined by the DOL job duties test criteria.

Here are some examples of exempt employees working for a church:

• Senior Pastor/Minister: Responsible for leading the congregation, delivering sermons, providing spiritual guidance, and overseeing church operations. This role typically involves managing other staff members and exercising significant independent judgment.

• Executive Director: Manages the overall administrative functions of the church, including strategic planning, financial oversight, and human resources. This position involves high-level decision-making and organizational leadership.

• Director of Religious Education: Develops and oversees religious education programs for children, youth, and adults. This role includes curriculum development, volunteer coordination, and program evaluation, requiring advanced knowledge and independent judgment.

• Music Director: Leads the church’s music ministry, including directing choirs, planning worship music, and coordinating musical events. The position requires creativity, leadership skills, and professional expertise in music.

• Financial Manager: Oversees the financial operations of the church, including budgeting, accounting, and financial reporting. This role requires a deep understanding of financial principles and the ability to exercise discretion in financial matters.

• Counselor/Pastoral Care Minister: Provides counseling and support to members of the congregation, addressing spiritual, emotional, and relational issues. This role requires advanced training and the ability to exercise independent judgment in providing care.

• Director of Outreach and Missions: Plans and coordinates the church’s outreach programs and mission activities. This role involves strategic planning, program development, and leadership in engaging with the community and external organizations.

These roles typically involve significant responsibilities, advanced knowledge, and the exercise of discretion and independent judgment, making them exempt under the Fair Labor Standards Act (FLSA).

Employees who do not meet the Department of Labor’s job duties test criteria are non-exempt. Examples of non-exempt employees include:

• Administrative Assistants: These employees handle clerical tasks such as answering phones, managing schedules, and preparing documents. They typically do not exercise significant independent judgment in their roles.

• Custodians: Responsible for cleaning and maintaining the church property, including restrooms, offices, and common areas. Their work is routine and does not require an advanced degree.

• Church Bookstore Cashiers: These employees manage sales transactions, stock shelves, and provide customer service in the church bookstore. Their duties are primarily transactional and do not require advanced knowledge or decision-making authority.

• Nursery Workers: Individuals who care for children during church services and events. They ensure a safe and nurturing environment but do not perform work that requires advanced specialized knowledge.

• Maintenance Workers: Employees who perform routine repairs and upkeep of the church facilities, such as fixing plumbing issues, painting, and performing minor electrical work. Their roles are hands-on and do not involve managerial responsibilities.

• Receptionists: These employees greet visitors, answer questions, and perform other front desk duties. Their work is typically routine and does not require significant independent judgment.

• Event Coordinators: Staff who help plan and execute church events, setting up spaces, coordinating volunteers, and handling logistics. While they manage various aspects of events, their duties are often guided by established protocols.

Additionally, non-exempt employees:

• Must be paid at least minimum wage for all hours worked, and overtime pay for hours over 40 in a seven-day workweek. (Some states have different rules, such as California, where employees who work more than eight hours in a workday must be paid overtime.)

• Have primary job duties that do not require an advanced degree or advanced knowledge.

• Are usually directly supervised.

• Work in positions where job responsibilities are routine.

Once you have determined the appropriate classifications for your employees or independent contractors, ensure the individuals are correctly set up in your payroll (W-2 employees) or accounts payable systems (1099 workers).

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Clergy Financial Resources
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Tel: (888) 421.0101
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com