As noted a couple of weeks ago on the Southwestern HR Consulting website, the Feds have increased the exemption threshold for purposes of overtime. If this doesn’t sound familiar, then you will definitely want to become acquainted with the changes as the first phase will become effective on July 1, 2024. 

What does this mean?

In order for an employer to exempt an employee from paying time-and-a-half for overtime (hours worked in excess of 40 hours during a single week), the individual must pass both the Department of Labor (DOL) duties test, requiring them to perform a certain type/level of work, and must be paid a salary above the established threshold. The current salary exemption level is $684 per week or $35,568 per year. The changes below will increase the wage rates that you will have to pay before an employee can be exempt from overtime to:

  • Phase 1: July 1, 2024: $844 per week ($43,888 per year)
  • Phase 2: Jan. 1, 2025: $1,128 per week ($58,656 per year)

In addition, there will be additional updates to the salary threshold every 3 years based on wage data at that time. 

So, for example, if I have an employee who currently makes $36,000 per year and they perform primarily executive, administrative, or professional duties, according to Department of Labor (DOL) regulation…let’s say they are a manager…I do not have to pay them overtime today. That means they can work forty, fifty, or sixty hours per week and they don’t get paid time-and-a-half for hours worked over 40 hours in a week. I am paying them a straight salary to get the job done regardless of the number of hours required.

If I don’t increase their salary to $43,888 per year on or before July 1, 2024, and to $58,656 per year on January 1, 2025, I will then have to pay my employee time-and-a-half for all time over 40 hours worked in a single week. If instead, I decide I want to keep the employee as exempt, I will have to additionally ensure that when rates are increased in the future that the rate I pay that employee is updated sufficiently to meet the new threshold. 

The short movie below provides a quick review of the changes:

Restoring and Extending Overtime Protections (youtube.com)

These changes are sweeping and there are many implications to your business that need to be considered before you decide whether to increase your salaries or have your employees’ designation revert from exempt to non-exempt. We are currently discussing what those changes mean with our clients so they can make the best decision for their business. If you need Human Resources expertise on this item or others, we can help you at Southwestern HR Consulting (SWHRC).  Contact SWHRC today at the link above to talk to find out about our services and our team of experts.

Magdalena Vigil-Tullar

Written by | Magdalena Vigil-Tullar


Phone: 505-270-7494 | Email: magdalena@swhrc.com

PO Box 14274 | Albuquerque, NM 87191

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Federal Regulations FLSA Overtime Pay