Making sure you classify employees correctly is critical to avoiding financial penalties, but also a tad complicated given how frequently the law changes.

Here are some key federal changes to salary thresholds for exempt employees that you should know about for 2024. (If you need more help with employee classification and navigating various requirements for exempt employees, check out our employee classification policy guide.)

White Collar Exemption

On April 23, 2024, the U.S. Department of Labor published its final rule increasing the salary threshold for the white collar exemptions under federal minimum wage and overtime law:

  • On July 1, 2024, the threshold will increase from around $35,000 to $43,888.
  • On January 1, 2025, a new methodology for calculating the threshold will take effect, which will increase the threshold again to $58,656.
  • Starting July 1, 2027, salary thresholds will update every three years based on up-to-date wage data to determine new salary levels.

Highly Compensated Exemption

The rule also increases the salary threshold for the highly compensated exemption. The current threshold is a little over $107,000. On July 1, 2024, that will increase to $132,964, and then to $151,164 on January 1, 2025. This salary threshold will update along the same cadence as the white collar exemptions.

Next steps for employers

Although not effective immediately, employers should start planning now for these sweeping changes to salary thresholds for exempt status requirements.

Employers are likely to have employees who are exempt under current standards but who will no longer be exempt under the increased salary threshold. For those employees, employers will need to think through whether to:

  1. Increase the employee’s salary to meet the new threshold, or
  2. Reclassify the employee as non-exempt and begin tracking the employee’s hours for minimum wage and overtime requirements.

Regardless which approach you choose, you’ll need to enact policy updates and refresh your employee handbooks to reflect the new salary thresholds—tasks SixFifty can help with so you don’t miss compliance deadlines.

For more information on this change and the pros and cons of different classification strategies, check out our recent webinar on employee classification. In this webinar, we dig into all the considerations employers will need to think through in response to the shifting legal landscape around employee exemption. We have also updated SixFifty Exempt Non-Exempt Analyzer tool to reflect these changes so that you can start preparing now.