One of the fundamental principles in the American workplace is that time is valuable, and the Fair Labor Standards Act (FLSA) has long upheld this by ensuring workers are fairly compensated. Starting January 1, 2025, the Department of Labor will be extending overtime protections to millions more salaried employees, making it crucial for employers to stay ahead of these changes.
Key FLSA Changes Effective January 1, 2025
The new overtime rule will raise the salary threshold for employees exempt from overtime pay under the executive, administrative, and professional (EAP) exemption. Currently, salaried workers earning less than $684 per week are entitled to overtime pay. Beginning January 1, 2025, that threshold will rise to $1,128 per week. This means more employees will qualify for overtime pay if they work over 40 hours in a week.
Additionally, the threshold for highly compensated employees will increase from $107,432 to $151,164 per year, further expanding the pool of workers eligible for overtime pay. These changes are designed to keep pace with evolving salary levels, ensuring workers’ pay reflects their time and effort.
What Employers Should Do Now
With the salary thresholds rising, employers will need to take proactive steps to ensure compliance and avoid unexpected overtime costs. Here are two key strategies to consider:
Reclassify Employees as Non-Exempt: If you have employees whose salaries fall below the new threshold, it may be more cost-effective to reclassify them as non-exempt. This means they will be entitled to overtime pay for any hours worked over 40 in a week. For employers with budget constraints, this could be the best option to manage compliance while keeping payroll in check.
Raise Salaries to Meet the New Minimum: For key employees who are close to the new threshold, it may make sense to increase their salaries to meet or exceed $1,128 per week. This would allow you to maintain their exempt status and avoid the need to track overtime, especially if these employees regularly work more than 40 hours a week.
Preparing for Future Updates
Starting in 2027, the salary thresholds will be updated every three years based on current wage data. Employers can plan ahead by integrating these scheduled updates into their workforce and compensation strategies, ensuring they are not caught off guard by future changes.
Final Thoughts
The new FLSA overtime rule aims to restore fair compensation for salaried workers, but it also means employers will need to make strategic decisions about staffing and compensation. By preparing now on whether you will reclassify employees or adjust salaries—employers can ensure compliance and retain talent in a competitive market.
For more information or to chat with one of our certified HR specialist, please visit our website at www.OmniaHr.com today.
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