FLSA Overtime Rule
The Fair Labor Standards Act overtime rule determines whether employees are eligible or exempt for overtime pay. Exempt employees, because of their rate of pay and type of work that they do, are not eligible for overtime pay for hours worked over 40 in a workweek. Nonexempt employees must be paid time and a half for any hours worked more than 40 in a workweek.
The rule does not affect overtime requirements for workers who are paid hourly.
DOL Announces New Overtime Rule Salary Thresholds
The U.S. Department of Labor announced an update to the FLSA overtime rule on April 23, 2024, that is expected to extend mandatory overtime pay to about four million salaried workers. The new overtime rule salary threshold increases to $43,888 on July 1, 2024, and increases again to $58,656 as of Jan. 1, 2025. Unless exempt, employees covered by the Fair Labor Standards Act must receive at least time and one-half their regular pay rate for all hours worked over 40 in a workweek if their salaries are below these thresholds.
Starting July 1, 2027, the DOL also will automatically increase the overtime threshold every three years.
What is the Salary Threshold?
The overtime salary threshold for exempt employees is a key component in determining eligibility for overtime pay. Employees earning less than the threshold are generally eligible for overtime, while those earning more may be exempt, depending on their job duties.
Important Overtime Rule Dates:
April 23, 2024: New overtime rule announced.
July 1, 2024: Salary threshold rises to $43,888.
Jan. 1, 2025: Salary theshold rises to $58,656.
July 1, 2027: Threshold increases every 3 years.
What Does the New Overtime Rule Mean for Employers?
Employers must decide whether to raise the salary of employees who earn below the new overtime threshold so they remain exempt from overtime pay. Employers that choose not to raise these employees’ salaries should be prepared to pay overtime when they work more than 40 hours in a workweek.
Additionally, schedules for employees whose salaries are not raised above the new threshold may need adjusting to limit overtime costs.
Careful communication should be rolled out to explain why employees formerly categorized as exempt are now nonexempt.
How to Prepare for the New Overtime Rule
To meet the Jan. 1, 2025, deadline for the new federal overtime rule, HR professionals must lay the groundwork now. To do that, experts suggest taking the following steps:
- Identify currently exempt employees who earn less than the new annual threshold of $58,656.
- Estimate how much overtime those employees currently work.
- Analyze your budget to help assess your compensation options.
- Review job descriptions for exempt positions to verify that the duties are accurately listed.
- Ensure that employees in the same roles aren’t classified differently, because that could prompt discrimination claims.
- Develop a communications plan for those moving from exempt to nonexempt status to minimize negative impact on morale.
- Consider placing restrictions on overtime and explore ways to track nonexempt workers’ hours.
- Determine whether changes are needed in other policies such as telecommuting and mobile device usage to curtail overtime and working off-the-clock.
SHRM Member Resources
SHRM members have access to additional overtime rule resources, including implementation toolkits, example policies, how-to guides and more.
Discover key insights into FLSA overtime exemptions with this detailed guide.
Ideal for employers and HR professionals, this members-only toolkit offers essential information on eligibility, salary thresholds, and job duties to ensure compliance and effective workforce management.
This overtime policy template details procedures for managing overtime pay compliance for nonexempt employees.
This template outlines the conditions for overtime eligibility, helping employers effectively control labor costs and adhere to regulatory standards.
This members-only toolkit provides insights into the benefits and risks of using overtime, including solutions for challenges like workforce dependency and safety concerns.
Discover practical strategies for optimizing overtime use to balance workload, cost, and employee welfare effectively.