What Is the New DOL Overtime Rule for 2024?

Overtime pay is a fundamental element of labor law, ensuring that employees are fairly compensated when they work beyond their standard 40 hours a week. It’s designed to protect workers from overwork and to encourage employers to hire additional staff if needed rather than relying on excessive hours from existing employees.

Starting in 2024, the Department of Labor (DOL) is implementing significant updates to the overtime rule, potentially impacting millions of employees and the businesses that employ them.

Here, we break down these changes and provide guidance on how businesses can understand and prepare for the upcoming shift.

What Are the Changes in the DOL Overtime Rule?

Let’s start with the specifics of the updated DOL overtime rule:

Salary Threshold Increases

The most significant change is in the salary level that determines whether an employee is exempt from earning overtime pay. Currently, employees earning less than $684 per week ($35,568 per year) are generally entitled to overtime.

As of July 1, 2024, this threshold increases to $844 per week ($43,888 per year). Then, on January 1, 2025, it further increases to $1,128 per week ($58,656 per year).

Employees earning below these thresholds will need to receive time-and-a-half pay for any hours worked over 40 in a workweek unless another exemption applies.

Highly Compensated Employees (HCE)

There’s also a change for highly compensated employees. These employees are exempt from overtime pay if they meet specific criteria, including earning a minimum annual salary.

Currently, this salary is $107,432 per year. On July 1, 2024, it will rise to $132,964, and then to $151,164 on January 1, 2025.

Automatic Updates

A notable addition that’s found in the new rule is an automatic updating mechanism. Every three years, the DOL will review and potentially adjust these salary thresholds based on current wage data. This provision aims to keep the overtime eligibility standards in line with economic realities.

Why These Changes Matter

The DOL overtime rule changes have a widespread impact. Businesses with employees currently classified as exempt may find these employees become overtime-eligible due to the higher salary thresholds.

This shifts the way employers need to calculate labor costs and could lead to several outcomes:

Increased Salary Costs: Employers may decide to increase the exempt employee’s salary to maintain their exemption status.
Reclassification: An employee could be reclassified as non-exempt, entitling them to overtime pay whenever they work beyond 40 hours per week.
Reduced Hours: Businesses may limit the hours these employees work to avoid paying overtime.
Hiring: Employers might opt to hire additional staff to spread the workload if there’s a need for frequent overtime.

Understanding these potential outcomes is essential for businesses to start planning how they’ll adapt to the new overtime rule and remain compliant with labor laws.

What Does This Mean for Businesses?

The 2024 DOL overtime rule changes mean businesses need to carefully assess their potential impacts. Let’s break down some of the key considerations:

Increased Overtime Costs

Unless you increase salaries, reclassify positions, or reduce working hours, you may face higher labor costs due to overtime pay. This is especially important for businesses with many employees currently hovering above the existing salary threshold, as they could become eligible for overtime.

Reviewing Employee Classifications

Compliance is paramount. Now is the time to meticulously review every employee classification to ensure it aligns with the updated rule. Even a small change in the salary threshold has the power to shift an employee from exempt to non-exempt status. Incorrect classifications can lead to fines and back-pay obligations, so it’s better to be proactive.

The Cost Question: Raise Salaries or Reclassify?

This is a big decision for many employers. Increasing salaries maintain the exempt status of employees, which may be simpler administratively.

However, for positions where frequent overtime is necessary, reclassification to non-exempt could be more financially viable, even with overtime pay calculations. This decision will vary from business to business and should be made carefully.

What Steps Can Businesses Take?

Waiting to address these changes until they take effect is not wise. Proactive planning is important for a smooth transition. Here’s what your business should start doing now:

Analyze and Strategize

Dive deep into your payroll data and employee classifications. Identify which employees could be impacted by the rule change, and project what that might mean for your labor costs under different scenarios (raising salaries, reclassification, and so on).

Budget Considerations

Work with your finance or accounting team to forecast the potential financial impact. Prepare different budget scenarios that reflect your possible strategies for adapting to the rule change.

Timekeeping Technology

If reclassifying employees becomes necessary, ensure you have an efficient system in place to track their working hours accurately. Explore technological solutions that simplify timekeeping and streamline overtime calculations.

Policy Updates

Review and revise policies related to overtime authorization, use of company equipment outside regular hours, and off-the-clock work expectations. These policies ensure compliance and help set clear boundaries for both exempt and non-exempt employees.

Clear Communication

Change can be unsettling for employees. Craft clear messages about the upcoming DOL rule changes and how those might impact specific roles. Transparency builds trust and minimizes anxiety.

The decision of how to react to the new overtime rule is complex. It’s best for businesses to work with their legal and HR advisors to ensure compliance and make the most strategic choices based on their specific circumstances.

What Are Additional Resources and Considerations?

Overtime regulations are continuously evolving and can get intricate, especially when you factor in differences at the state and local levels. It’s important to remember that your business might have additional obligations beyond the federal requirements outlined in the DOL overtime rule.

To stay updated and informed, here are some reliable sources:

Department of Labor (DOL) Website

The DOL offers extensive resources, FAQs, and fact sheets about the Fair Labor Standards Act (FLSA), which encompasses overtime regulations.

Legal Counsel

Consult your attorney to ensure you fully understand the implications of the new rule and any specific state or local laws that apply to your business.

Mosey’s Role

Managing compliance with all the various employment and payroll regulations can be time-consuming and prone to human error.

Mosey organizes all your state payroll compliance obligations, including identifying areas where you may need to set up new payroll accounts, such as those with the DOL in each state. This streamlines your processes and provides peace of mind.

Comply With the 2024 DOL Overtime Rule With Mosey

The DOL overtime rule changes are significant, and businesses shouldn’t underestimate their impact.

Here are the key takeaways to remember:

Don’t Delay: Start analyzing your employee classifications and payroll data now. This gives you ample time to make informed decisions and adapt your strategies.
State Matters: Always consider your state and local labor laws, as these may have stricter requirements or different thresholds than the federal rule.
Seek Guidance: Consulting experts ensure you avoid costly compliance mistakes and make the right choices for your business.

By taking a proactive approach and understanding all that goes into the new rule, businesses can successfully adhere to these changes and minimize disruption. If you’re looking to streamline your compliance processes, schedule a demo and see how Mosey can simplify your workload and provide ongoing support.

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