The Department of Labor (DOL) has announced a significant increase in the salary threshold for certain exempt positions, a change that will make millions more employees eligible for overtime pay. This change includes a $9,000 increase in the minimum exempt salary by July 1, 2024, and another increase of $15,000 by January 1, 2025.
While this adjustment may require employers to swiftly adjust their pay practices, it also presents an opportunity to ensure fair compensation for their workforce. Specifically, the Department of Labor revealed that the salary threshold for “white-collar” exemptions will rise from $35,000 to approximately $44,000 on July 1, with a further increase to nearly $59,000 by January 2025. This change means that certain positions must earn at least this new threshold to be considered exempt from overtime pay under these new standards. With approximately 4 million workers expected to be affected by this change, employers must assess and potentially revise their compensation plans accordingly.
While we anticipate legal challenges, a court injunction before the effective dates is not guaranteed, underscoring the need for prompt action and preparation.
Below are the top 10 considerations to address before the new regulations take effect:
- Understand the Key Changes
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- The current salary threshold for exempt employees is $684 per week or $35,568 annually.
- New regulations will increase this threshold first to $844 per week, or $43,888 annually, and subsequently to $1,128 per week, or $58,656 annually on 1/1/25.
- Additionally, the “highly compensated employee” (HCE) exemption threshold will increase significantly.
- Assess Compliance with Pay Practices
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- Beyond the salary threshold, ensure exempt employee positions meet all criteria, including salary basis and specific duties.
- Evaluate Reclassification Decisions
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- Determine whether affected employees should have their salaries raised to meet the new threshold or be reclassified as non-exempt.
- Consider factors such as pay adjustments, regular rate calculations for overtime, and benefits implications.
- Manage Employee Morale
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- Recognize potential morale implications, as reclassification may be perceived negatively despite unchanged, or even increased, total pay. This underscores the importance of carefully communicating these changes to maintain compliance with federal regulations. Proactively communicate with your employees about the reasons for these changes. This open dialogue will not only help them understand the reasons behind the adjustments but also make them feel valued and included in the process of maintaining compliance with federal regulations.
- Provide Advance Notice
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- Issue written communications outlining changes in compensation and associated responsibilities, adhering to state-specific notice requirements.
- Review Policies on Equipment and Devices
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- Ensure consistency in policies regarding company equipment and personal device usage for exempt and non-exempt employees.
- Develop Training Programs
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- Implement comprehensive training for reclassified employees and managers on timekeeping, break policies, and other relevant topics.
- Confirm Duties Test Compliance
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- Ensure that exempt employees’ primary job duties meet the requirements for their respective exemptions under federal law.
- Consider State-Specific Regulations
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- Stay informed about any wage and hour law variations at the state level, including different salary thresholds and exemptions. Remember, many states have a higher salary threshold (higher than federal minimum) that must be met.
- Stay Updated on Legal Challenges
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- Anticipate potential legal challenges to the new regulations and prepare accordingly, recognizing the need to comply unless halted by judicial intervention.
By proactively addressing these considerations, employers can navigate the upcoming changes and ensure compliance with evolving labor standards. And remember, you are not alone in this process. HR Services is here to assist you every step of the way, providing the support and guidance you need to manage these changes effectively.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
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