The New Overtime Rule Affecting Millions of Workers
On July 1, 2024 – and again on January 1, 2025 – the Federal Department of Labor will substantially increase the minimum salary an employer must pay certain employees to classify them as exempt from overtime pay under the federal Fair Labor Act.
Businesses, therefore, must make tough strategic decisions. They can either increase salaries (in some cases by up to 64%) to meet the new threshold or start paying affected employees' overtime when they work more than 40 hours per week.
Employers face many issues, such as more employers will need to record the hours of salaried employees, calculate the correct overtime rates, and keep a record of compliance if audited.
Starting on July 1, 2024, an exempt executive, administrative, or professional employee must receive a salary of at least $43,888 per year in order to be classified as exempt from FLSA overtime pay. On January 1, 2025, that salary threshold will increase again to $58,656.
Under the new rule, the minimum salary thresholds will increase like clockwork every three years, starting on July 1, 2027.
For employers with eligible workers below the salary threshold, they will need to take one of the below actions before July 1, 2024. They can:
Increase the salaries of affected employees so they meet the new threshold and do not forfeit the exempt status.
Convert the employees to non-exempt status, which would make them eligible for overtime pay.
An employer may convert employees to non-exempt status and then continue to pay them on a salary basis plus overtime or pay them an hourly wage plus overtime.
There must be in place a mechanism to track all their work hours and make sure overtime is paid when there are over 40 hours in a week – in addition to their salary or hourly wage.
These rules will affect many employees, such as:
Managers and some shift leads
Office staff including finance, accounting, tax, quality control, purchasing, marketing, public relations, internet and database admin, human resources, compliance, and others
Professionals including doctors, lawyers, CPAs, registered nurses, dentists, architects, pharmacists, professors, physician assistants, and engineers
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
For more information on this and other topics, please contact Kevin via any of the channels listed below:
📧 kevin@kmckernan.com | 📞 718-317-5007