What Business Owners Need to Know

Key Takeaways:
  • As of July 1, 2024, the minimum salary for exempt employees must be at least $844 per week. 
  • Starting Jan. 1, 2025, this minimum increases to $1,128 per week. 
  • Reclassifying employees as non-exempt can have major implications.


Significant changes to overtime compensation rules are on the horizon, which may affect how you classify and pay your employees. Starting July 1, 2024, new salary thresholds will be implemented by the Department of Labor (DOL), impacting both exempt and non-exempt classifications under the Fair Labor Standards Act (FLSA). Here’s what you need to know about the new overtime rules and how they might affect your business. 

Understanding the Classification of Exempt and Non-Exempt Employees 

The first step is to correctly classify your employees as either exempt or non-exempt under the FLSA. Exempt employees, who are not eligible for overtime pay, typically fall into one of three categories: 

  1. executives, 
  2. administrative, or 
  3. professional employees. 

Each of these categories has specific criteria defined by the DOL. For detailed definitions and additional categories, visiting the DOL website will provide the most current and comprehensive guidelines. 

Key Salary Threshold Changes 

For your exempt employees, there are salary thresholds you need to be aware of: 

  • As of July 1, 2024: The minimum salary for exempt employees must be at least $844 per week. 
  • Starting Jan. 1, 2025: This minimum increases to $1,128 per week. 

These changes mean any employee currently classified as exempt but earning below these thresholds will require a reassessment. You have two options: 

  1. increase their salary to meet the new threshold or
  2. reclassify them as non-exempt.

Implications of Reclassification 

Reclassifying employees as non-exempt can have significant implications. Non-exempt employees are entitled to overtime pay at a rate of one and a half times their regular hourly rate for hours worked beyond 40 in a week—except in states like California, where overtime rules differ. 

If you opt for reclassification, you will also need to implement time tracking systems to accurately record hours worked, a compliance element for non-exempt employees. 

This decision isn’t just about compliance, it also impacts your operational costs, payroll processes and even employee benefits. Benefits offerings often differ between exempt and non-exempt employees, adding another layer to your decision-making process. As you consider these changes, think about how they will affect your business operationally and financially. 

Preparing for Future Changes 

While the upcoming July 2024 threshold is the immediate focus, it’s also wise to prepare for the January 2025 increase. 

Adhering to these new regulations is not only a legal requirement but also a significant component of your business’s operational integrity and employee satisfaction. Misclassification can lead to costly lawsuits, fines and damaged reputations. Moreover, understanding and implementing these changes effectively can enhance your company’s internal operations and contribute to a fairer workplace culture. 

Taking action now will ensure smoother transitions and maintain compliance, safeguarding your business against potential penalties and ensuring your team remains productive and motivated. 

For a deeper dive into how these regulations might specifically affect your operations, contact an Adams Brown advisor.