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The Department of Labor recently enacted a rule that changed the threshold to determine which salaried employees are exempt from overtime pay. The new rule, which took effect on July 1, 2024, could substantially impact business owners as more salaried workers are now eligible to receive overtime pay if they work more than 40 hours a week.

Here is a breakdown of the latest rule and how this change could impact your business.

What Changed

The new rule includes different updates for two different salary levels: the standard salary level and highly compensated salary level.  

Standard salary-level employees are typically intro-level to management, whereas highly compensated salary-level employees typically hold C-Suite positions.  

Increase to the Overtime Exemption Threshold 

Standard Salary Level Employees

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 raised that income threshold.   

As of July 1, 2024, the new salary minimum is $844 per week (equivalent to $43,888 annually). This threshold will increase again on January 1, 2025, to $1,128 per week ($58,656 annually). 

Highly Compensated Level Employees 

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 increased to $132,964 in July 2024 and is set to rise again to $151,164 in January 2025.  

Automatic 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 stated that increases will be determined based on factors like inflation, standard salary levels, and other economic changes at the time of the update.  

How This Impacts Your Business

The Department of Labor estimates that this rule likely increased the number of employees eligible for overtime pay across the U.S. This could result in a significant jump in overtime wages for employers and facilitate changes to scheduling and staffing needs.

Have questions about this new rule or how it may impact your business? Our team of business advisory experts is here to help. Contact us.