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Legislative Update: U.S. DOL Raises Overtime Exemption Salary Thresholds

At People2.0, keeping our partners informed and prepared is our top priority. With this in mind, we are bringing to your attention a recent legislative update, the U.S. Department of Labor’s Final Rule on Overtime Exemptions, which might have significant implications for your business operations. 

Understanding the Legislation 

The US Department of Labor released a final rule on April 23, 2024 to raise the salary thresholds for certain overtime exemptions under the federal Fair Labor Standards Act (FLSA). The rule aims to ensure that employees earning below specified salary levels are eligible for overtime pay when working more than 40 hours per week or according to state requirements.

Key Provisions: 

  • Effective July 1, 2024, the salary threshold for executive, administrative, and professional employees will increase to $43,888 per year, and the highly compensated employee threshold will rise to $132,964 per year. 
  • On January 1, 2025, the thresholds will further increase to $58,656 per year for executive, administrative, and professional employees, and $151,164 per year for highly compensated employees. 
  • Beginning July 1, 2027, and every three years thereafter, the salary thresholds will automatically update. 

The rule does not change the job duties tests for overtime exemptions; it only updates the salary requirements. Note that there is a strong likelihood that this ruling will be challenged and could be overturned in the event of an administration change in 2025. 

What It Means for You 

Employers may need to reclassify certain employees as non-exempt and pay them overtime if their salaries fall below the new thresholds. Additionally, employers must ensure that employees classified as exempt meet both the new salary thresholds and the job duties tests for their respective exemptions. Proper classification can help employers maintain compliance, avoid penalties, and foster a more engaged and fairly compensated workforce. 

People2.0 ensures compliance with employment laws and regulations for workers on our payroll by guiding talent suppliers on necessary actions for workforce compliance. Our role as the employer of record (EOR) involves informing you about the requirements to maintain compliance for employees on our payroll. This proactive approach guarantees a seamless compliance process. 

Next Steps and Action Plan 

Immediate Actions: Conduct a comprehensive review of your workforce classifications and salaries to identify employees potentially affected by the new rules. 

Long-Term Strategies: Implement processes to regularly review and update employee classifications and compensation to maintain compliance as thresholds change. 

Personalized Assistance: Reach out to People2.0 for customized compliance solutions and ongoing support tailored to your specific business needs. 

Navigating Compliance Together 

People2.0’s commitment to your success extends beyond just providing services; we are your partner in navigating the complexities of the evolving global talent marketplace. By staying proactive and informed about legislative changes like the DOL’s Final Rule on Overtime Exemptions, we can collaboratively ensure that your business not only remains compliant but also thrives. Together, let’s continue to shape the future of work responsibly. 

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