You’ve worked hard, clocking in more than 40 hours a week, but if you’re a salaried employee making over $35,568 a year, you may find those extra hours go unpaid. That’s about to change for some employees in certain executive, administrative and professional roles currently classified as “exempt” from overtime protections.
In late April, the U.S. Labor Department finalized a rule that significantly expands overtime eligibility for salaried employees in the United States. This change is the most substantial increase in federal overtime eligibility in decades. Starting July 1, the salary threshold for overtime eligibility increases to $43,888. Another bump to $58,656 begins on Jan. 1, 2025.
Overtime expansion also impacts higher-paid workers
The Labor Department estimates the new rule entitles 4 million lower-paid salaried workers to receive overtime pay. Nearly 300,000 higher-paid workers also become eligible for OT under the expansion. The threshold for highly compensated workers increases to $132,964 on July 1 and $151,164 starting Jan. 1, 2025.
A new methodology will also take effect next year to calculate future increases. Beginning July 1, 2027, thresholds will automatically update every three years based on then-current wage data. Acting Labor Secretary Julie Su says the move restores fairness for salaried workers doing the same job as their hourly wage colleagues.
What are the next steps for employees and employers?
If you’re among the employees who will soon be eligible for overtime pay, it’s important to understand your rights and the new rules. Start by reviewing your job description and current salary. If your earnings are below the new thresholds, you may qualify for overtime pay when the changes occur.
For employers, preparation is critical to compliance. Businesses should begin auditing current staffing and classify employees correctly under the new rules. If necessary, they have time to adjust budgets to account for potential increases in overtime payouts. It’s also a good time for companies to review current pay structures for salaried workers.
Communication is vital. Employers should inform their teams about the upcoming changes and how they might affect pay structures. Transparency can prevent confusion and build trust within the workforce. Workers and businesses can navigate the transition smoothly with these preparations, ensuring employees receive fair compensation for their time and effort.