Beginning July 1, 2024, the annual salary-level threshold for overtime will increase in stages as mandated by the final rule from the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL).
Incremental Increases to the FLSA Overtime Salary Threshold
(July 1, 2024): The current threshold of $35,568 will rise to $43,888.
(January 1, 2025): The threshold will further increase to $58,656.
(July 1, 2027): The threshold will start increasing every three years.
Impact on Employers
Employers with salaried employees earning below the threshold who work over 40 hours per week must pay them overtime at a rate of time and a half. Employers are not required to raise salaries to meet the threshold but must comply with state thresholds if they are higher. For instance, New York State and NYC have higher thresholds that may increase on January 1, 2025.
Reactions and Feedback
The Society for Human Resources Management (SHRM) supports regular and reasonable updates to the salary threshold but opposes automatic increases. They emphasize the need for notice, comment periods, and evaluations of economic conditions before implementing changes.
Reason for Changes
The Department of Labor aims to extend overtime protections to more lower-paid salaried workers, ensuring that more employees qualify for overtime pay. This increase applies to bona fide executive, administrative, and professional (EAP) employees under the "white collar" exemption.
Compliance Steps for Employers
Employers must decide whether to raise salaries to meet the new threshold or pay overtime. Clear communication with employees about their status is essential, as is adjusting operations, schedules, and workloads to manage increased labor costs. Utilizing reliable payroll management software can ease this transition, ensuring compliance with the new rules. Consulting with professionals for guidance is also recommended.
Staying Updated and Preparing for Changes
Employers should stay informed about FLSA rules and local wage laws. They must either raise eligible employee salaries or prepare to pay overtime. It's important to begin preparations now for a smooth transition, including restructuring operations and maintaining effective communication with affected employees.
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