- Salary threshold jumps significantly. Effective July 1, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase again on January 1, 2025, to $58,656.
- Clarity brought to exempt classification. The updated rule defines and delimits who is a bona fide executive, administrative and professional employee exempt from the Fair Labor Standards Act’s overtime protections.
- Get ready for regular threshold updates. Starting July 1, 2027, salary thresholds will update every three years by applying up-to-date wage data to determine new salary levels.
On Tuesday, April 23, the Biden-Harris administration announced a final rule that expands overtime protections for millions of American workers by increasing the salary thresholds that are required under the Fair Labor Standards Act (FLSA). The updated rule defines and delimits, under the FLSA, who is a bona fide executive, administrative and professional employee exempt from overtime protections. The rule’s effective date is July 1.
According to details in an April 23 news release from the U.S. Department of Labor (DOL), the salary threshold for overtime consideration will increase on July 1 from $35,568 to the equivalent of an annual salary of $43,888. On January 1, 2025, the threshold will increase again to $58,656.
The July 1 increase updates the present annual salary threshold of $35,568 based on the methodology used in the 2019 overtime rule update. On January 1, 2025, the rule’s new methodology takes effect, resulting in the additional increase. The rule will also adjust the threshold for highly compensated employees.
According to the DOL press release, starting July 1, 2027, salary thresholds will update every three years to reflect changes in earnings “by applying up-to-date wage data to determine new salary levels.” According to the release, such regular updates will “ensure predictability” and “[protect] future erosion of overtime protections so that they do not become less effective over time.”
In the release, Acting Secretary Julie Su laid out the bottom line for workers and employers: “This rule will restore the promise to [certain] workers that if you work more than 40 hours in a week, you should be paid more for that time. Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable.”
Before issuing its proposed rule in September 2023, the DOL said it had numerous touchpoints with employers, workers, unions and other stakeholders. In developing the final rule, it stated it considered more than 30,000 comments.
“This rule establishes clear, predictable guidance for employers on how to pay employees for overtime hours and provides more economic security to the millions of people working long hours without overtime pay,” Wage and Hour Administrator Jessica Looman commented in the news release.
Updates and Discussion Occuring
Workspan Daily has been following progress toward this rule for months. In the coming days, we will update our coverage by providing context, insights and perspectives from WorldatWork experts and total rewards professionals. Check back for this content. In addition, WorldatWork members can click here to access an Engage discussion on this topic.
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