The U.S. Department of Labor (DOL) has finalized a significant rule that will substantially increase the salary threshold for overtime eligibility among salaried workers. This change, starting from July 1, 2024, will raise the current annual salary threshold from $35,568 to $43,888. A second increase to $58,656 is scheduled for January 1, 2025, marking a 64% rise from the existing overtime exemption salary threshold. These adjustments are part of a wider effort from the DOL to extend overtime protections to more workers.
The new rule finalizes the DOL's proposal in September 2023, which generated over 33,000 public comments. Under the new regulation, employers will need to (a) pay time-and-a-half for any work over 40 hours per week to those salaried employees earning under the new thresholds, (b) increase salaries to comply with the regulations, or (c) adjust working hours to under 40 per week to avoid increased payroll costs. The rule also introduces criteria for determining which workers qualify as executive, administrative, or professional (EAP) employees—categories that are exempt from overtime.
Additionally, the DOL has instituted an automatic adjustment mechanism that will update the salary threshold every three years based on wage data. This provision aims to keep the threshold in line with economic changes, ensuring that the benefits of the rule are sustained over time. However, this feature has also attracted opposition for potentially bypassing thorough review processes in future updates.
While the DOL’s new rule aims to enhance labor protections for a broader segment of the workforce, it also presents challenges and potential economic implications for employers, particularly small businesses. The rule not only promises to extend overtime pay to millions of additional workers but also requires careful consideration and strategic planning from businesses to manage increased labor costs effectively. All employers should review their classification of exempt employees in light of the new guidance, starting with reviewing employees classified as exempt whose salaries are under $43,888 and $58,656. This is a good time for employers to thoroughly review employment classifications to ensure compliance with DOL requirements.
Benefit Allocation Systems (BAS) provides best-in-class, online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 can Integrate with any insurance carrier for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and many others), and integrate with any payroll system for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and many others).
