Growing businesses often need to hire employees. They need young adults to work the cash register or skilled professionals to close sales or manage manufacturing operations. Each new employee can increase the company’s scale of operations, but they also increase operational expenses.
Employees are among the biggest costs associated with doing business. Companies have to cover their wages and make employment tax contributions. Employees also create the risk of legal issues. If employers do not comply with state and federal employment statutes, regulatory authorities could issue citations in some cases. Employees might file lawsuits in other situations.
Even businesses that try to do right by their employees can sometimes make mistakes that lead to financial and legal exposure. Changing overtime regulations might put many small and mid-sized businesses at risk of being named in overtime wage claims.
Minimum salary rules have changed
Hourly workers are typically eligible for overtime pay if they put in 40 hours or more in any given workweek. Many salaried employees are exempt from overtime pay rules. However, the government does require that the salary offered meet a certain minimum standard. Otherwise, companies could very easily abuse employees while paying them substandard wages.
For roughly half a decade, the minimum salary for overtime exemption was $35,568. That officially changed as of July 1st, 2024. The current minimum salary for overtime wage exemption is now $43,888. This was one of two planned increases. The second celery threshold increase takes effect on January 1st, 2025. At that point, workers need to make $58,656 or more to be exempt from overtime pay.
How can companies respond?
There are three options available for employers who had previously exempt employees who are not exempt anymore. They might decide to raise the salary paid to those workers. Doing so is smart if the company relies on consistent overtime to operate efficiently.
Other times, employers may need to adopt a policy against overtime if they intend to continue paying workers at their current rate below the exemption threshold. The final solution involves providing overtime pay as necessary for hours worked in excess of 40 when workers paid on a salary basis qualify for overtime wages.
Ensuring compliance with wage laws helps reduce the risk of employment law litigation. Wage claims can cost companies quite a bit of money and can damage their reputations as well.