In a move set to shock businesses across the US, the Department of Labor has released a proposed overtime rule change (dated: 8/30/2023) which suggests drastically changing the minimum salary requirement for overtime exemption. 

The rule is not yet in effect but has proposed increasing the salary threshold from $684 to $1,059 per week ($35,568 to $55,068 per year). The soon-to-be former figure was set at $684 in September of 2019, up from $455 established in 2004, representing a 50% increase in 15 years. Yet, merely four years later the DOL is pushing for a 54% increase, which will impact businesses of all sizes - but especially small businesses. “Out of control” inflation is widely credited as a significant motivating factor behind this action.

For many workers, the movement from hourly to salary pay is a rite of passage. Of course, there are several factors that determine eligibility to become exempt from overtime, but it’s still widely seen as a milestone in a person’s professional development. Not only does one no longer need to punch in and out, but former fluctuations in their pay are now essentially eliminated. Yet, a formerly respectable starting salary of $40-$50,000 now falls short of being able to provide a decent standard of living for young professionals, even in areas with lower housing costs.

The public still has a 60-day window to comment on the proposed rule before a final rule comes into effect. Nevertheless, this is very little time for businesses to reevaluate their pay structure, potentially changing some employees back to non-exempt, while offering others pay increases. 

For small businesses grappling with difficult decisions, AZ HR hub is here as a trusted partner in maximizing your Human Resources. Whether conducting a compensation analysis to determine what the market is paying or a comprehensive compliance audit of current pay practices, we’re ready to ensure you’re on solid footing.