A new overtime rule goes into effect today (as of this writing on July 1, 2024). The salary threshold for who qualifies for overtime pay just got a big fat increase, meaning more of your employees now qualify for more pay.
How big of an increase? Near 65 percent above the current threshold by January 1, 2025.
Are your eyebrows raised yet? Read on…
Effective July 1, 2024, the Department of Labor has implemented a significant change to overtime rules for salaried workers. This update means potentially more employees in your small business could now be eligible for overtime pay.
Feeling overwhelmed? Don't worry. I can help you navigate this change. But the changes go into effect immediately, so don’t bookmark this one for future reading.
If you want the official rule, here it is.
But here's a (much shorter) breakdown so you know the basics:
The Big Change
Previously, salaried workers making above a certain threshold were exempt from overtime pay. Now, that threshold has increased, meaning more employees qualify for overtime.
The Salary Shift
Before the update, salaried workers earning more than $35,568 annually (684 per week) were generally exempt from overtime. Now, that threshold has jumped to $43,888 per year (844 per week). This means employees making under this new limit may qualify for overtime if they work more than 40 hours a week.
Job Duties Still Matter
The same rules for overtime exemption still apply. So not all salaried workers under the new threshold automatically get overtime. It also depends on their job duties.
Exempt Duties: Employees with primarily managerial, executive, or certain professional duties are generally exempt from overtime pay, even if their salary falls below the new threshold.
Non-Exempt Duties: If an employee spends a significant portion of their time performing tasks typically done by hourly workers (such as data entry, assembling products, or making sales calls), they're likely considered non-exempt. These employees may now qualify for overtime pay if their salary is under the new threshold.
What Didn’t Change
The new rule doesn't change the overtime pay rate itself, which is still time-and-a-half (1.5 times the employee's regular rate) for any hours worked over 40 in a workweek. But with more employees potentially eligible, keeping track of overtime becomes even more important.
More Changes to Come
This is just the first phase. On January 1, 2025, the Department of Labor will implement a second, even higher threshold based on a different calculation method. This new threshold will be around $58,656 annually (1,128 per week).
Another important thing to know is that these salary thresholds won't stay static. The Department of Labor has set up a system for automatic adjustments every three years based on current wage data. This means the minimum salary for overtime exemption will continue to increase in the future.
Legal Challenges on the Horizon
It's important to note that this new overtime rule is facing lawsuits from business groups who argue it will be too burdensome for employers. The outcome of these lawsuits could potentially delay or modify the changes. We'll keep you updated on any developments.
This is just a glimpse into the new overtime landscape, with more changes sure to come. There are additional details and nuances to consider in order to stay in compliance. But, as always, we'll help you stay informed and compliant, so you can focus on what matters most – running your successful small business.
Questions? You can find some answers from the DOL here. My team can also help make sure your payroll procedures are up-to-date so you can confidently navigate these changes. Reach out to set up a time here:
410-721-6000