Your salaried employees are over the new overtime threshold, now what?

The US Department of Labor's recent announcement updating overtime pay eligibility has left many employers scrambling to assess the impact on their workforce. The new rule, set to take effect on July 1, 2023, will raise the minimum annual salary threshold for exempt employees from $35,568 to $43,888, with a further increase to $58,656 scheduled for January 1, 2025. As a result, HR departments must now decide whether to convert affected employees to nonexempt status or increase their pay to maintain their exempt status.

To navigate this complex situation, employers should follow a step-by-step approach. First, they must identify the employees whose salaries fall below the new threshold and assess the financial implications of potential pay increases. Next, they should analyze the effects of converting employees to nonexempt status, including the impact on morale, job flexibility, and benefits. Despite the possibility of legal challenges to the new rule, employers should continue to prepare for the July 1 deadline while monitoring any court rulings that may affect its implementation.

Finally, effective communication is crucial in implementing any changes related to the overtime rule. HR teams should develop a comprehensive strategy to inform affected employees, whether through one-on-one meetings, written communications, or webinars. By providing clear explanations, setting expectations, and addressing employee concerns, employers can ensure a smooth transition and minimize the risk of confusion or discontent among their workforce.