New Overtime Rule: Update on the Salary Threshold Overtime Exemption

Beginning July 1, 2024,?the salary threshold for determining employee overtime exemption will increase to the equivalent of an annual salary of $43,888 (approx. $844 per week) and will ?increase again to $58,656 on Jan. 1, 2025. The overtime eligibility for employees is not based on salary alone, it is a three-pronged approach. Employers should look at:

1. Salary basis test
2. Standard salary level test
3. Standard duties test

The chart below breaks down the three-pronged testing for determining exempt status for executive administrative and professional positions:

Conducting the three-pronged test to determine eligibility is important. If an employee’s primary duties fall within executive, administrative, or professional categories, they may still be exempt from overtime pay even if your salary is below the threshold.

In the Department of Labor April 23, 2024, news release,?Biden-Harris Administration Finalizes Rule to Increase Compensation Thresholds for Overtime Eligibility, Expanding Protections for Millions of Workers, Julie Su, Acting Secretary, is quoted explaining why this change is happening:

“This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” said Acting Secretary Julie Su. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable. The Biden-Harris administration is following through on our promise to raise the bar for workers who help lay the foundation for our economic prosperity.”

What does this mean for employers?

Employers should look at their salaries annually to ensure competitiveness, review for equitability, and now ensure employees are properly categorized as exempt or non-exempt. Those who are non-exempt are eligible for overtime (time and one-half) when they work over 40 hours in a workweek.?Employers should also consider that although some positions may now become overtime eligible, this is also an opportunity to look at how work gets done. What efficiencies can you build into your processes to allow work to be completed within a standard 40-hour workweek? Our first goal should be to allow employees to spend more time with their families and develop work life balance.

Reminder:?When determining eligibility for overtime, make sure that all considerations are made: salary, salary level (executive, administrative or professional) as well as standard duties are considered.?Reach out to your favorite HR consultants for support with this process and to help with any transition and communication necessary.

Want to learn more or need HR support? Visit our website:?www.essexconsulting.net?to schedule a consultation.