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Previously exempt employees may soon be eligible for overtime pay

On Behalf of | Jul 1, 2024 | Business Law

Labor costs can be one of the most expensive aspects of running a successful organization. Every employee represents an investment in the form of wages, benefits, training and taxes. Contractual agreements with employees and careful business practices can help control labor costs for an organization. Employers have to abide by both federal law and the contracts that they negotiate with their workers.

Leadership at a company can help promote a positive work culture by remaining compliant with employment regulations. Otherwise, workers might become resentful and discuss taking legal action. Ensuring that the company follows payroll statutes is therefore of the utmost importance. One of the more expensive payroll rules is the obligation to pay certain workers overtime wages.

When employees provide more than 40 hours of work in one week, they may be eligible for pay at 150% of their standard hourly wage. Hourly workers are not the only ones eligible for overtime pay. Companies may also need to provide overtime wages for certain workers with salaries. The pool of workers eligible for overtime as salaried employees has recently expanded significantly.

The federal government increased salary requirements

Companies don’t always have to provide extra pay because employees put in extra hours. Many salaried workers are exempt from overtime wage requirements. However, employees typically need to earn a minimum salary to the exempt from overtime pay requirements. If companies pay workers less than the minimum required salary, the workers are eligible for the same overtime pay as any hourly worker.

Previously, the exempt salary was $35,658 per year. Starting July 1st, 2024, workers are exempt from overtime pay requirements if they earn at least $43,888. There is a second adjustment that takes effect at the beginning of 2025. Workers must earn $58,656 to be exempt from overtime wages beginning next year.

Companies may have to be proactive about ensuring compliance with that new rule and future adjustments. The new final rule also requires federal reevaluation of that exempt salary threshold every three years going forward. Employers may have to adjust their scheduling practices or increase the salaries of certain workers to remain compliant with the new rules.

Employers who are unaware of, and/or non-compliant with, those changing federal employment regulations could be at risk of wage and hour claims brought by salaried employees. Ensuring proper compliance with federal employment laws can help minimize the risk of litigation that could damage a company’s finances and reputation.