A Breakdown of the Department of Labor’s Latest Overtime Rule Effective July 1, 2024
The Department of Labor (DOL) finalized a new rule in April 2024 that impacts overtime pay for American workers. The rule, which is set to go into effect on July 1, 2024, updates the salary threshold used to determine which salaried employees are exempt from receiving overtime pay.
Here is a breakdown of the rule and what changes business owners could see as a result.
What’s Changing
The new rule is split to include different updates for two different salary levels: standard salary level and highly compensated salary level.
Standard salary level employees are those that are typically intro level to management. Highly compensated salary-level employees typically hold C-Suite positions.
Increase to Overtime Exemption Threshold
Standard Salary Level
Previously, employers were not required to pay overtime pay to any salaried employee who made at least $684 per week, equivalent to $35,568 per year. The new rule raises that income threshold.
Effective July 1, 2024, the new salary minimum is $844 per week (equivalent to $43,888 per year). This threshold is set to increase again on January 1, 2025, to $1,128 per week ($58,656 annually).
Highly Compensated Level
Similarly to the standard income level employees, the overtime exemption threshold has also been increased for “highly compensated” employees, usually those in the C-Suite. The previous threshold was $107,432, which will increase to $132,964 in July 2024 and rise again to $151,164 in January 2025.
Automated Increases Every 3 Years Beginning in 2027
The Department of Labor’s rule also establishes automatic updates to the salary threshold every three years for both standard and highly compensated employees.
The Department of Labor says the increases will be determined based on factors like inflation, standard salary levels, and other economic changes at the time of the update.
Impact on Businesses
The Department of Labor estimates that this rule will increase the number of employees eligible for overtime pay across the U.S. This could result in a significant jump in overtime wages for employers, along with potential changes in work schedules and staffing.
Have questions about this new rule or how it may impact your small business? Our team of business advisory experts is here to help. Contact Us.