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New Overtime Rule Raises Salary Level in Two Phases

The U.S. Department of Labor (DOL) recently announced its final overtime rule that completes the rule making process announced in August 2023 and raises the salary basis for overtime exemptions under the Fair Labor Standards Act (FLSA).


Key points:

• Exempt executive, administrative, and professional (EAP) employees:

o Effective July 1, 2024, the final rule increases the standard salary threshold from $684 per week ($35,568 per year) to $844 per week ($43,888 per year).

o Effective January 1, 2025, the standard level will increase again to $1,128 per week ($58,656 per year).


• Exempt highly compensated employees (HCE):

o Effective July 1, 2024, the final rule increases the “highly compensated employee” (HCE) total annual compensation threshold (the level at which a relaxed duties test is applied) from $107,432 to $132,964 per year.

o Effective January 1, 2025, the HCE level will increase again to $151,164 per year.


• The final rule continues the use of non-discretionary bonuses and incentive payments to satisfy up to ten percent of the standard and special salary thresholds under certain circumstances.

• The final rule includes a new mechanism that automatically increases the executive, administrative, and professional (EAP) salary threshold every three years (beginning on July 1, 2027).

• The final rule does not change the existing job duties tests for any exemption.


What this means to you:

1. Review your employees’ exemption status and determine which employees are currently classified as salaried exempt and are making less than $844 per week. SynchronyHR can assist in providing pay information.


2. Determine what action to take, keeping in mind the threshold increases again January 1, 2025 (see 3 below). Your actions are either:

a. increase compensation by July 1, 2024 for employees affected by the initial salary threshold increase (up to $844 per week for the specific employees discussed above and $132,964 annually for HCEs); OR

b. change the exemption status to non-exempt, informing employees that they:

i. will be paid for all hours worked

ii. need to record time via company defined mechanism

iii. will be entitled to overtime for hours worked over 40 hours in a work week or as defined by state law

iv. Restate the seven day period/workweek during which overtime is calculated


3. Mark your calendar for Q3 2024 to repeat the above process in anticipation of the next threshold increase to $1,128 effective January 1, 2025. ($151,164 annually for HCEs).

Please contact your SynchronyHR HRBP if you have any questions.

*This article is for informational purposes only and is not intended as legal advice. For further information, please consult a legal professional.


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