The U.S. Department of Labor recently updated overtime rules, which may impact small businesses with salaried employees.
Overtime regulations have always been part of the Fair Labor Standards Act, protecting hourly workers and some lower-paid salaried employees. Under the latest update, which went into effect July 1, salaried workers who earn less than $844 per week and $43,888 per year will become eligible for overtime pay, meaning any hours worked over 40 per week must be paid at a rate of at least one and a half times their regular pay rate. Additionally, on January 1, 2025, the rates where salaried workers must become eligible for overtime pay increase to $1,128 per week and $58,656 per year. Some workers, like executives and professional employees, are exempt from these rules.
The idea that salaried workers have access to overtime protections is not new. The rate has just not been updated since 2019. So, only those making less than $684 per week and $35,568 per year were eligible. Now, the Department of Labor is setting up a regular schedule and formula for these updates. So, they’ll be calculated automatically every three years after the aforementioned updates.
For now, it’s important for small businesses to update their scheduling and payroll practices to meet these regulations. If you have salaried employees within the new pay ranges, updating their overtime wages or changing their schedules may be necessary.
While this can represent some extra work for businesses in the short term, many believe that the system of automatic updates created by the Department of Labor will ultimately make changes more predictable and easier for small businesses to plan around.
Jill Avery-Stoss, chief operating officer for research and consulting organization The Institute in Wilkes-Barre, Pennsylvania, told the Times-Tribune, “I think small businesses will probably struggle with the adjustment a little bit. I can understand why, perhaps, it might not be very popular among some small business owners but if nothing else, I think the automatic updates to the changes every three years – when the formula is recalculated – will benefit businesses in that they can better prepare for it and know what is to be expected.”
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