Each month, we will tackle one of those burning questions that keeps you awake at night or causes heartburn during the day. Our team of experts will help you stay in the know. We'll cover topics like recruiting trends, legislation, workplace issues and more. You'll get information and answers to help you hire and retain top performers.
This month’s question is about changes to the Federal Department of Labor (DOL) salary thresholds for exempt employees. “What does my organization need to do to prepare for the new DOL exempt salary changes in January 2025?”
Let’s face it—keeping up with exempt vs. non-exempt status can feel like trying to solve a riddle wrapped in a mystery written in legal jargon. Click here to read the DOL notice.
For most businesses, navigating the DOL changes to salary thresholds is confusing at best, overwhelming at worst. And just when you’ve finally figured out one set of rules, along comes a new update for 2025. But wait, there’s still more confusion at play! Many states, cities, and municipalities have regulations that are different from the Federal ones for minimum wage and calculating overtime. But don’t worry; if you’re still working out the details, you’re far from alone!
Here, we’ll break down the essentials of what’s changed, what you should have done by now, and what steps you can take to ensure your business is fully ready come January 1.
By now, businesses should have:
Reviewed Employee Salaries: Identify exempt employees making below the new threshold of $1,128 per week (equivalent to $58,656 per year). For highly compensated employees, the compensation level is $151,164.
Reassessed Job Classifications: Verify that exempt employees’ duties meet the requirements under the new rule, as both salary and duties tests are essential.
Considered Budget Impact: Analyzed how increasing salaries or reclassifying employees might affect payroll and overall budgets.
What do I need to do by January 1, 2025?
Adjust Salaries or Reclassify Employees: For employees who will remain exempt, ensure they meet the new salary threshold by the deadline. If you’re reclassifying employees as exempt or non-exempt, make necessary changes to job descriptions. For any newly classified non-exempt employees also prepare to track their hours. You’ll also want to communicate your overtime policies so there are no surprises on January 1.
If you’re unsure whether an employee’s role qualifies as exempt, the DOL has handy resources that cover both the salary and duties tests (see DOL’s Wage and Hour Division for details).
Update Employee Handbooks and Policies: Reflect any changes in your employee handbooks or policy documents so that exempt and non-exempt classifications are clear.
Set up Time-Tracking Tools: Invest in or update systems to track hours effectively.
What If I Haven't Started Yet? Is It Too Late?
Not at all! While time is tight, you can still comply by prioritizing a few critical actions:
Audit Salaries: Identify employees earning below the new threshold. You will need to increase their salaries or reclassify them if their job duties meet the tests for non-exempt.
Evaluate Roles: Ensure that all exempt employees meet the duties test for their classifications.
Seek Assistance: Consult with legal advisors who specialize in employment law to make sure all changes align with both local, state, and federal regulations.
Going forward, keep an eye on:
State and Local Laws: Some areas may have different exempt thresholds or additional requirements.
Employee Hours: For employees reclassified as non-exempt, ensure time-tracking practices are consistent to prevent unapproved overtime.
Labor Market Updates: Change is inevitable so monitor the labor market, as DOL and state regulations continue evolving.
Taking these steps will ensure your business is compliant and ready for a smooth transition. Remember, a little preparation can prevent bigger headaches down the road.
Disclaimer:
This blog post is for informational purposes only. It should not be considered legal advice (because let's be honest, we didn’t go to law school). To ensure your business is fully compliant with these laws and any other regulations that might pop up, it’s always a good idea to consult an attorney—preferably one who loves reading legal fine print as much as you love running your business.
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