Danielle M. Verderosa

Danielle M. Verderosa

President, HR Allies

DOL Increases Salary Thresholds for Exempt Employees

How’s a 65% raise sound to you?

 

No, not for you – for your employees.  Specifically, the junior employees to whom you pay a weekly salary instead of an hourly wage.

 

Last week – in a really exciting week for us HR compliance nerds – the U.S. Department of Labor issued a Final Rule that increases the minimum salary thresholds for your exempt employees – by a little more than 25% on July 1, 2024 and then by 65% on January 1, 2025.

 

The DOL has always required that most employees be paid an overtime rate of time and one-half for all hours worked over 40 in a workweek.

 

But they also provide an exemption from that overtime requirement for employees employed as bona fide executive, administrative, professional, outside sales, and certain computer employees.

 

In order to receive that exemption, though, the employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $684 per week – which is $35,568 per year.

 

On July 1, that minimum weekly salary will increase to $844 per week – and will increase again on January 1, 2025 to $1,128 per week.  And then every three years, automatically, that threshold will increase again.

 

An estimated four million U.S. salaried employees are currently paid less than what they’ll need to be paid by January 1.

 

Do any of them work for you?

 

If so, here’s what I recommend you do:

 

 

  • Review each exempt employee’s classification.

 

If you’ve got someone you’ve classified as “exempt from overtime” but their job duties don’t really pass that DOL exemption test, this is a great time to re-classify them as non-exempt (meaning – eligible for overtime) in conjunction with the new July 1 rule.

 

And believe me – it’s much better for you that *you* carefully consider how they should be legally classified than if the DOL winds up doing it for you.

 

 

  • Consider your options for impacted employees.

 

If you decide you can and should continue to exempt them from overtime, you’ll need to adjust their weekly salary to meet these new minimum thresholds.

 

If you reclassify them as nonexempt, there may be unintended consequences beyond the new cost of overtime.  When you move an employee from a salary to hourly status, they’ll often feel like you’ve demoted them.  Morale could dip; turnover could increase; and their benefits might even change depending on how you’ve designed your benefits plan.

 

 

  • Plan out your employee messaging and provide advanced notice.

 

Some states and local jurisdictions require advanced notice of any wage changes.  Even if there’s no requirement, you’ll want your employees to know how much you value them and why you’re making an adjustment to their new employment status.

 

If you do reclassify your employees as non-exempt and eligible for overtime, you’ll also want to train them on your relevant policies including timekeeping, meal and rest breaks, and approval for overtime work.

 

 

There will probably be legal challenges to this Final Overtime Rule, and there’s a chance it could even be delayed.  But still – take these next two months to prepare for it.  And if you need any assistance or have questions, please don’t hesitate to get in touch with us at HR Allies!  You can email us here or even schedule a free 20-minute video or phone consultation by clicking here.  We’re here to support you every step of the way.

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