There are new salary threshold increases starting in 2025.
On April 24, 2024, the United States Department of Labor (DOL) announced a long-anticipated final rule that greatly expands the number of U.S. workers eligible for overtime pay:
- Effective July 1, 2024, the salary threshold will increase to $844/week (equivalent to $43,888 per year).
- Effective Jan. 1, 2025, the salary threshold will increase to $1,128/week (equivalent to $58,656 per year).
According to the DOL, the July 1 increase updates the present annual salary threshold of $684/week ($35,568 annually) based on the methodology used by the prior administration in the 2019 overtime rule update. On Jan. 1, 2025, the rule’s new methodology takes effect, resulting in the additional increase.
Additionally, the rule will adjust the threshold for highly compensated employees. Starting July 1, 2027, salary thresholds will update every three years; current wage data will be used to determine new salary levels.
What employers must do to prepare
If you have exempt employees earning less than the new threshold amounts, you will need to do one of the following:
- Reclassify those employees as nonexempt (and therefore eligible for overtime pay)
- Raise their pay (either twice — once for each applicable threshold — or just once to the Jan. 2025 level)
Note that the federal overtime rules represent a floor rather than a ceiling. Certain states and municipalities have overtime rules that are more generous to employees. Also, the new rule does not affect the current job duties tests for overtime pay, which must be satisfied before an employee can be declared exempt.
The law firm Fisher Phillips has recommended tracking the hours of affected employees to better “understand the potential impact of converting to non-exempt status and to make an informed decision when the time comes.” You must also consider the impact on benefits.
Need more information?
The DOL has released an informational page about the new final rule.
To learn more about how the DOL’s new final rule will affect your business, and how to prepare, contact our Human Resources Consulting team.
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