The New Overtime Rule and What It Means For Your Workers

Employee rights are constantly evolving, and one recent change is the new federal overtime rule. With this update, millions of workers could experience a direct impact on their pay and work-life balance. For employers, it brings changes to how they classify and compensate employees, while workers might see adjustments to their work hours, job classification, and overtime eligibility. This blog will break down what the new overtime rule entails, who it affects, and what it means for workers’ day-to-day lives.

What Is the New Overtime Rule?

The U.S. Department of Labor (DOL) periodically revisits the regulations for overtime pay, and recent changes have raised the threshold for overtime eligibility. The latest rule increases the salary threshold, meaning that more employees who previously weren't eligible for overtime pay due to their classification or salary level may now qualify.

Under the new rule, salaried employees earning less than the threshold are generally eligible for overtime pay when they work over 40 hours per week. In addition, the rule establishes certain protections for specific roles, such as employees in executive, administrative, or professional roles who meet salary and duty-based criteria.

Overtime Rule Starting July 1st, 2024

Starting July 1, most salaried workers who earn less than $844 per week will become eligible for overtime pay under the final rule.

Overtime Rule Starting January 1st, 2025

And on Jan. 1, 2025, most salaried workers who make less than $1,128 per week will become eligible for overtime pay. 

Who Is Exempt From The Overtime Rule?

Some workers are specifically exempt from the FLSA’s minimum wage and overtime protections, including bona fide executive, administrative or professional employees. This exemption, typically referred to as the “EAP” exemption, applies when: 

1. An employee is paid a salary,  
2. The salary is not less than a minimum salary threshold amount, and 
3. The employee primarily performs executive, administrative or professional duties.

How Does This Affect Workers?

Here’s how the rule might affect workers across different sectors:

1. Increased Overtime Pay Eligibility
   Employees who earn under the new thresholds may now qualify for time-and-a-half pay for hours worked beyond 40 hours per week. For many, this change represents an opportunity to earn additional income if their role or industry regularly requires overtime.

2. Potential Adjustments in Work Hours
   To manage overtime costs, some employers may decide to limit hours to avoid paying overtime, which could benefit workers seeking better work-life balance. However, it could also mean fewer hours (and less pay) for those who rely on overtime as part of their income.

3. Reclassification of Job Roles
   Some employees might see their job classifications change. If previously exempt employees now fall under the new overtime rule, they might become hourly instead of salaried workers. While this reclassification ensures fair compensation for extra hours, it could also lead to adjustments in roles and responsibilities, as well as how work is scheduled.

What This Means for Employers and Payroll

Employers must assess which employees are now eligible for overtime under the new rule and determine how to accommodate these changes within their payroll processes. Accurate time tracking, payroll adjustments, and employee communication are crucial to maintaining compliance. If you have any questions about the process or which of your employees become eligible, please get in touch with Horizon today!

Key Considerations for Workers

While the rule provides a boost in earnings for many, it’s essential to keep a few things in mind:

• Track Your Hours: For newly eligible employees, tracking hours accurately becomes vital. Be sure to discuss any tools or software available for logging hours worked with your employer.

• Understand Reclassification: If your role is reclassified, ask questions about any changes to your responsibilities, benefits, or hours.

• Stay Informed: Employers may implement new policies to comply with the rule, so staying updated on your rights and how changes apply to your role can help you make the most of this new rule.