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Payroll

Understanding the New Overtime Rule for Salaried Employees

By June 14, 2024No Comments

Disclaimer: Employers must seek their own counsel and not rely solely on the information provided by Applied Payroll Solutions. This content is for informational purposes only and does not constitute legal, accounting, or tax advice.

As a leader in payroll and employee management solutions, Applied Payroll Solutions is dedicated to keeping local businesses informed about significant changes in labor laws. The Department of Labor’s new overtime regulation, set to take effect on July 1, 2024, will have a considerable impact on businesses and their salaried employees. Here’s what you need to know to stay compliant and manage your workforce effectively.

Key Changes Under the New Salary Overtime Rule

The new rule increases the salary level that determines which salaried workers are entitled to overtime pay protections under the FLSA.

Overview of Upcoming Dates

DateOvertime Eligibility ThresholdHighly Compensated Employee Threshold
Currently$35,568/year$107,432/year
July 1, 2024$43,888/year$132,964/year
January 1, 2025$58,656/year$151,164/year

Overtime Eligibility Updates:

  • Currently: Most salaried workers earning less than $35,568 per year are eligible for overtime pay.
  • Starting July 1, 2024: Most salaried workers earning less than $43,888 per year will be eligible for overtime pay.
  • Starting January 1, 2025: Most salaried workers earning less than $58,656 per year will be eligible for overtime pay.
  • Starting July 1, 2027: Eligibility thresholds will be updated every three years based on current wage data.

Changes for Highly Compensated Employees:

  • July 1, 2024: Increase from $107,432 to $132,964 per year.
  • January 1, 2025: Increase to $151,164 per year.
  • July 1, 2027: Earnings thresholds will be updated every three years to keep pace with changes in worker salaries.

How This Impacts Your Business

For business owners, these changes mean it’s crucial to review and possibly adjust your payroll practices. Here are a few steps to consider:

  1. Evaluate Current Salaries: Review the salaries of your employees to determine who will be newly eligible for overtime pay.
  2. Adjust Budgets: Plan for potential increases in payroll expenses starting in July 2024 and January 2025.
  3. Update Payroll Systems: Ensure your payroll systems are updated to handle the new thresholds and regulations.
  4. Communicate Changes: Inform your employees about the changes and how they may affect their compensation.

Timekeeping Requirements

Additionally, if your business needs assistance with timekeeping (since the new rules require that eligible salaried employees track their hours), we offer comprehensive timekeeping software to help you stay compliant. Learn more about the timekeeping requirements for salaried employees on the DOL website.

Exemption for Small Businesses

The Fair Labor Standards Act (FLSA) generally applies to employees of enterprises with an annual gross volume of sales made or business done totaling $500,000 or more. Additionally, employees may be individually covered by the law if they are engaged in interstate commerce or in the production of goods for commerce. Businesses falling below this threshold may not be covered under FLSA guidelines, but it’s advisable to stay informed about these changes as they could indirectly affect business operations.

For more detailed information and practical steps to ensure compliance, please refer to the following guides:

Applied Payroll Solutions is here to help you navigate these changes. If you have any questions or need assistance in updating your payroll practices, please don’t hesitate to contact us. We are committed to supporting your business through every regulatory update.