In this episode I brought Rhamy Alajeal back to make sure you are aware of upcoming changes to the Fair Labor Standards Act’s Overtime Exemption Rules in the United States (ie legal overtime). Starting in July 2024, any salaried employee making less than $43,888 per year MUST be paid overtime. In January 2025 that number will move up to $58,656.
These changes will have a major financial impact on small businesses with employees. Businesses may have to raise salaries, reclassify employees as hourly, or risk costly legal issues if they don’t adjust their overtime practices. Rhamy outlines several strategies businesses can use to address the new rules, as well as the importance of proper record-keeping and communication with employees.
What you’ll learn:
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- A history of overtime exemptions from the FLSA (Fair Labor Standards Act)
- What is legal overtime and what rules you need to abide by
- New minimum salary thresholds coming in 2024 and 2025
- Strategies for addressing the new rules
- otential impacts on salary compression and overall labor costs
- Why you need tracking hours for non-exempt salaried employees
- How to avoid a $1 million lawsuit due to misclassification of salaried employees
Key Moments:
[00:11] Top 20 Profit Leaks Every Business Owner Should Avoid
[04:02] Profit Leaks in the Customer Service Representative Team
[14:02] Boost Team Morale and Productivity by Addressing Underperforming Employees
[15:37] The Perfect 10 Checklist for Exceptional Service and Customer Satisfaction
[20:47] Building Customer Relationships Builds Trust and Retention
[24:06] Maximizing Bottom Line Profits for Home Service Businesses
Overview of the Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) was passed nearly 100 years ago and established a minimum wage, 40-hour work week, and overtime pay requirements in the US. Over the years, various exemptions have been added to the law.
Current Overtime Exemption Threshold and Upcoming Changes
The current minimum salary threshold for the FLSA overtime exemption is $684 per week ($35,568 per year). Employees making less than this must be paid overtime.
The minimum salary threshold will increase to $844 per week ($43,888 per year) on July 1, 2024, and then to $1,128 per week ($58,656 per year) on January 1, 2025.
Strategies for Addressing the Changes
As a business owner, you have a few options, such as moving employees to hourly pay, continuing to pay a salary but tracking hours and paying overtime, or increasing salaries to meet the new exemption thresholds.
1 Million Dollar Consequence For Misclassifying Employees – A Case Study
A small tire shop had classified its receptionists as salaried, exempt employees. But when a former receptionist sued for unpaid overtime it was found that the receptionists’ job duties did not actually meet the criteria for the administrative exemption under the FLSA. Legally the business owed these employees overtime pay that had not been paid. The business owner didn’t have records to refute the claims and ultimately settled the case for $1 million.
Tracking Hours and Communication with Employees
Tracking hours for salaried employees may seem like a pain, but it can give you helpful insights. It can show you the workload being carried and any potential burnout issues coming. When communicating the change of tracking hours to your salaried employees, transparency is key. You can frame it as an administrative requirement, or blame it on the government, but your employees need to know that it protects both their jobs and your business.
About Rhamy: Rhamy Alejeal and his wife, Elizabeth, are the owners of People Processes, a provider of integrated, automated HR processes. Rhamy and his team work with hundreds of companies across the United States, helping them learn how to stop pushing paper and start prioritizing people. In addition, Rhamy serves on the Federal Reserve’s Industry Council on Healthcare, providing insights into employer costs and how they affect businesses in today’s marketplace. He holds a bachelor’s degree in financial economics and an MBA with a focus on economics. His book, People Processes was an Amazon #1 best seller in the HR category, and one of INC.com’s Top Ten leadership books in 2019.
Resources:
Salary Minimum Increase Calculator
Connect With Rhamy:
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