Guidelines for when salaried employees earn less than the revised overtime threshold

An annual salary of $43,000 is earned by a K-12 administrative professional. With compensation surpassing $35,568 per year, she is ineligible for overtime pay according to the Fair Labor Standards Act’s revised 2019 regulations.

However, a recent U.S. Department of Labor announcement will change this scenario in less than a month. The final rule on overtime pay eligibility has been updated, increasing the FLSA’s minimum annual salary threshold through two changes that will take effect gradually.

The first increase, on July 1, will raise the minimum annual salary from $35,568 to $43,888 per year. Later, the threshold will escalate to $58,656 per year on Jan. 1, 2025, marking a 65% rise from the current level. Subsequent automatic increases will occur every three years based on DOL’s formula.

Decision-making responsibilities now confront the HR department of the hypothetical K-12 professional’s employer. Choices include maintaining the current pay level and changing the employee’s status to nonexempt for overtime eligibility or increasing the pay to maintain exempt status according to the new threshold.

The employer’s dilemma lies in whether to raise the employee’s pay to meet the July threshold or surpass it in preparation for the 2025 rule change. The decision requires careful consideration due to various factors affecting organizational finances and employee perception of professional status.