The Department of Labor (DOL) has released its new overtime rules in April of 2024. The biggest impact for Agencies is that the minimum salary threshold for white-collar exemptions will increase on July 1 and again on January 1, 2025.

Effective July 1, 2024, an executive, administrative, or professional employee must receive a salary equivalent to $43,888 per year to be classified as salaried and exempt from overtime. This will increase to $58,656 on January 1, 2025.

Meanwhile, the annual compensation threshold for the highly compensated employee exemption will increase to $132,964 on July 1, 2024, and then again to $151,164 on January 1, 2025.

These numbers are higher than what the DOL previewed in its August 2023 proposed rule. And they represent a significant jump from the current $35,568 salary level for executive, administrative, and professional employees, and the $107,432 minimum compensation level for highly compensated employees.

These rules will likely be delayed by lawsuits, but it is important that agencies begin the planning process if it becomes effective.

Immediate Steps Agencies Should Take:

1. Review your current employee salaries and classifications.
2. If you have employees being paid under the new threshold you will need to decide whether to pay them at the new threshold or change their status from salaried/exempt to hourly/non-exempt. Factors to consider include how many OT hours an employee currently works and how much it may cost to pay them in overtime vs. increase their salary.  How will the work get covered if employees are now able to only work 40 hours per week?
3. Prepare to answer questions your staff may have about the new rule and timing of salary increases or changes in classification status. Questions to prepare for:
   1. When do you plan to implement changes?
   2. Will I be getting a raise?
   3. Does this mean I have been underpaid?

Start Planning for Changes You May Need to Make to Agency Operations

• If you have hourly employees for the first time you will need to pay them on a weekly or biweekly basis, so their payroll is based on 40-hour work weeks. A bimonthly or monthly payroll process will make it difficult to properly account for overtime hours based on a 40-hour week.
• Budgeting for potential overtime
• Updates to job descriptions
• Updates to payroll systems to properly track hours worked and overtime
• Training for employees and supervisors on time tracking and compliance.
• Setting clear policy expectations that working OT for hourly employees requires manager approval
• Do you have benefits plans or policies that are different based on employee status?
• How will you manage perceptions and change for your employees about perceived status and autonomy?

For more information about whether an employee should be classified as hourly or exempt check out these resources.

For more detailed questions please feel free to consult with Brian Lawrence, our Director of HR Solutions.