Are you Considering Pay Raises?: DOL's New Overtime Rules Could Influence Your Decision (Before July 1, 2024)
· July 1, 2024: Minimum salary jumps more than 20% from $684 per week ($35,568 annually) to $844 per week ($43,888 annually).
· January 1, 2025: Minimum salary increases to $1,128 per week ($58,656 annually) by January 1, 2025
The U.S. Department of Labor (DOL) has announced its final overtime rule, and it's a game-changer that will have a wide-reaching impact on companies. If you are a company with a CEO who expects everyone to “give 110%,” or if you are a company that keeps salaries as low as possible and leans on culture or some other aspect of an Employee Value Proposition, you need to dig into this NOW.
Understanding the Changes
The DOL has raised the minimum salary needed to qualify for "white collar" overtime exemptions under the Fair Labor Standards Act (FLSA). If you have employees classified as exempt, you will want to double-check that they meet all the criteria, including hitting this new salary threshold.
For the executive, administrative, or professional exemption, the minimum salary jumps more than 20% from $684 per week ($35,568 annually) to $844 per week ($43,888 annually), starting July 1, 2024. Then, it will increase to $1,128 per week ($58,656 annually) by January 1, 2025.
And they plan to tweak it every three years starting from July 1, 2027.
If you utilize that "highly compensated employee" exemption, your minimum annual salary increases from $107,432 to $132,964 on July 1, 2024, and then to $151,164 by January 1, 2025. And yes, they're doing the same three-year updates for this one too.
What Must Employers Do in the Next 60 Days?
Ensure your employees are correctly categorized under FLSA
Review the classifications of your employees. Ensure they meet both the salary threshold and the duties test required for exemption. If any fall short, consider reclassifying them as non-exempt and adjusting their pay accordingly.
Find out who MUST get a raise.
Review the salary of your employees. Determine the cost of bringing salaries above the threshold AND the impact on pay compressions for those already above the threshold. Where raises are not possible, determine overtime policies, train managers, and set expectations.
Communicate Changes
Keep your employees, managers, and executives informed about any changes to classification or pay. Transparency is key to maintaining trust and morale within your workforce.
Update Policies and Procedures
Review your company's policies and procedures for overtime pay, timekeeping, and work hours. Ensure they align with the new regulations and make any necessary adjustments.
Train Managers and HR Staff
Provide training to your managers and HR staff on the updated overtime rules. Make sure they understand the changes and how to implement them in your organization accurately.
By taking proactive steps to audit your employees and adjust your policies accordingly, you can navigate the DOL's new overtime rules with confidence and minimize the risk of non-compliance.
Plan for January 2025
The pay jump at the start of 2025 may consume your entire annual increase budget. Getting ahead of this cliff is essential for any effective solution. This means you need to schedule your initial audit and adjustment discussions this summer. Your team and most outside consultants will be fully booked by Fall, and you may be left out in the cold.
Don’t have time for an audit before July 1?
Contact us. We can help!