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What You Need to Know About the New Overtime Rule

On April 23, 2024, the U.S. Department of Labor (DOL) issued a final rule increasing the Fair Labor Standards Act’s (FLSA’s) annual salary-level threshold for white-collar exemptions to overtime requirements. The level will rise in two phases. Effective July 1, 2024, the salary threshold will increase from $35,568 to $43,888. Then, the threshold will increase to $58,656 as of January 1, 2025. Starting July 1, 2027, the overtime threshold will be automatically increased every three years. 

What Is the Salary-Level Threshold? 

An employee’s salary is one of the factors that decides whether they are eligible for overtime pay (non-exempt) or not (exempt). Under the FLSA’s white-collar exemptions, some executive, administrative, and professional employees do not need to be paid overtime.  

If the employee is paid a salary of at least the threshold amount and meets certain duties tests, they are exempt from overtime. If they’re paid less or don’t meet the tests, employees must be paid 1.5 times their regular hourly rate for hours worked more than 40 in a workweek. 

What Should Organizations Do About This Rule? 

These deadlines are coming up fast! Although details are still being ironed out on the national level, and it’s possible it will be overturned, don’t wait to start planning to make sure you’ll comply if it takes effect as planned.  

Identify which employees whose salaries fall between the current threshold and the upcoming increased threshold. Consider whether it makes sense to raise their salaries so they remain exempt. If not, you should be prepared to adjust them to an hourly, non-exempt employee and pay them overtime. If you don’t want to adjust their compensation structure, you could also adjust their schedules to limit overtime costs. Be sure to also budget for those salary increases or higher overtime costs, whichever decision you make. 

You might use this as an opportunity to review all your exemption determinations and make sure they’re in compliance. Whether you do that or not, you’ll need to plan how you’re going to communicate the changes to employees who were reclassified. Be ready to explain to employees why they were formerly exempt and are now non-exempt. 

Make sure you review state and local wage and hour laws, as well; they may impose additional requirements for exempt status beyond the federal FLSA requirements. 

When communicating the changes to your team, keep in mind how those whose salaries are closest to the new threshold will be impacted. If you’re increasing salary ranges to avoid paying overtime, how does that affect the salary ranges of people whose salaries already fell within the new threshold? Compensation is one of the many things people need to have trust in to feel good about their organization, so transparency, open dialogue, and clear plans around compensation management are key to their comfort. 

Where Can I Learn More? 

These are a few SHRM articles we found useful: 

If you have questions about the new rule or would like assistance determining your employees’ exempt or non-exempt status, reach out to Purple Ink! We can help in a variety of ways, like coaching on how to talk with staff about the changes, evaluating your job descriptions and/or compensation ranges, or full audits of your employees’ FLSA status.   

Emily Miller
Emily Miller
Emily is Purple Ink’s Director of Marketing. She enjoys being able to exercise both her creative side and her analytical side, and as a Learner, loves helping to create new services and tactics and discovering the best ways to share them with the community.

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