Starting July 1, some of your exempt employees may need to be classified as non-exempt.

Are you ready for everything that entails?

The new U.S. Department of Labor overtime rule will take effect this summer, with the first of two increases in the annual salary required to exempt employees from overtime.

Increase date	Minimum annual salary for exempt employees

July 1, 2024	$43,888
January 1, 2025	$58,656

Starting July 2027, the threshold will update every three years.

6 steps to take right now

Know who might be affected. Anyone currently classified as exempt who earns less than the threshold will be eligible for overtime pay.

Decide whether to increase salaries or reclassify as non-exempt.You may decide it's easier to raise some or all exempt employees' salaries above the new thresholds in order to maintain their exempt status.

Consider how to best track overtime. Anyone who is reclassified as non-exempt will now have to be paid overtime for anything over 40 hours in a week (or 8 hours in a day in California). This means you will need to track hours worked for all non-exempt employees, which may necessitate a close look at your current systems and processes.

You may decide that it's enough to simply log overtime hours on a time sheet. Or you may find that as policies become more complex, you need a clearer view into all hours worked. Just be sure to maintain precise records of hours, overtime and compensation to comply with the Fair Labor Standards Act (FLSA).

Our preferred time tracking solution, developed specifically for HR with our input, TimeOut software with Timesheets functionality simplifies time and leave management. Create unlimited rules to maintain employee histories and time off policies. Learn more.

Review policies and rules. Do employees generally work 9-to-5 with an hour for lunch? Do you allow flexibility to manage personal business? Are exempt employees eligible for vacation, insurance or other benefits that aren't available to non-exempt employees? Shifting an employee to non-exempt status may have unintended consequences for benefits or accrued time off—you may need to create new policies and rules to accommodate status changes.

Communicate clearly. Any new policies, processes or tracking systems will require transparent communication and training to ensure that everyone is on board. You may also need to give thought to employee morale—some people may see being reclassified to non-exempt as a type of demotion. Keep the lines open with employees and managers.

Forecast the impact on your budget. Determine how salary increases or overtime payments might affect costs, staffing or operations today, so you can avoid surprises and make informed decisions.

Connect with Sue Brocaglia at Creative Workforce Solutions to adjust to the new rule and head off issues you may not even see coming. Our team can assist with time tracking solutions, policy development, training and more—all to ensure that you remain compliant with minimal disruption to operations, budgets and morale.

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