BLR's HR Hotline provides plain language answers to your most pressing questions by our team of in-house subject matter experts.

Q&A: Salary review for new overtime threshold

Author: BLR

An employee who makes $50,000 annually is only required to work overtime two weeks a year during special events. The extra hours she works during those two weeks are given back to her in vacation time.

Does my employee’s salary need to be increased starting January 1, 2025, to stay in line with the new overtime salary threshold?

Under the newly issued rule—effective July 1, 2024—the FLSA regulations’ standard salary level for white-collar exempt workers increases from $684 per week to $844 per week ($43,888 per year). Effective January 1, 2025, the level will increase again from $844 per week to $1,128 per week ($58,656 per year).

The federal Fair Labor Standards Act (FLSA) permits public sector employees to give employees compensatory (comp) time off in lieu of monetary overtime compensation. Comp time must be given at a rate of at least 11/2 hours for each hour of employment for which overtime compensation is required (FLSA Sec. 7(o)). Employees whose jobs involve public safety, emergency response, or seasonal activities may accrue 480 hours of compensatory time. Other employees may accrue no more than 240 hours of compensatory time. Beyond that, they must be paid money for overtime.

Private employers are not authorized under federal law to give comp time and must give monetary overtime compensation. However, a narrow exception exists for private employers that pay employees every 2 weeks or less frequently. In such cases, an employer may give an employee compensatory time off, provided that the comp time is taken in the same pay period. For example, if an employee works 2 hours of overtime in the first week of a 2-week pay period, an employer may give the employee 3 hours (time and one-half) time off in the second week of the pay period in lieu of overtime pay. Officials at DOL’s Wage and Hour Division report that most time-off plans violate the law. Therefore, before implementing such plans, employers should submit them to the Division for review.

Once this rule is effective, you will need to increase this employee’s salary to be in line with the new threshold in January 2025 or reclassify this employee as non-exempt and pay them for any overtime hours worked at the rate of time and one-half (1.5x) their regular hourly rate. Note that legal challenges are expected, which may result in the rule being delayed or blocked. Accordingly, you will want to continue to monitor developments prior to increasing your employee’s salary or reclassifying the employee as exempt.

What is HR Hotline?

Subscribers of HR Hero® get access to our team of in-house subject matter experts. HR Hotline allows subscribers to submit questions and receive timely, thorough, and plain-language answers from our team of experts—complete with resources and references.

The purpose of HR Hotline is to help connect workplace human resources questions to the material provided by BLR on its subscriber websites. While the service is defined as providing advice, it is assistance to help bridge the gap between the BLR compliance resources and our client’s workplace issues. It is not a legal opinion or replacement for seeking legal counsel.