New U.S. Overtime Rule Raises Exempt Salary Thresholds by July 2024
The U.S. Department of Labor (DOL) has released an updated overtime rule, effective July 1, 2024. This rule significantly increases the minimum salary for exemption as an executive, administrative, or professional employee, and the minimum total annual compensation for exemption as a 'highly compensated employee'. Employers must prepare for these changes.
The new rule raises the minimum weekly salary for exemption from $684 to $844, annualizing to $43,888. Additionally, the minimum total annual compensation for highly compensated employees increases from $107,432 to $132,964. Employers should assess which employees will be affected and decide whether to raise salaries or reclassify employees to overtime-eligible status.
Further increases are planned. By January 1, 2025, the minimum annual compensation level will reach $151,164. Every three years, the DOL will adjust these levels based on current earnings data. The rule also introduces a new minimum weekly salary of $1,128, annualizing to $58,656, effective January 1, 2025. Notably, the rule does not alter exceptions for teachers, lawyers, physicians, or the alternative method for paying computer employees.
Employers have until July 1, 2024, to comply with these changes. They should prepare supervisors to manage overtime costs and understand included hours and compensation. If salaries are increased, employers should consider the 'duties test' risk. The DOL's updated overtime rule aims to ensure fair compensation for overtime work, and employers must adapt their practices accordingly.
