Fundamental changes will be introduced in the overtime payment rules in the US from April 2025, impacting approximately 3.6 million workers. The Department of Labor concluded these rules in November 2024, and it is believed to be the largest overhaul of overtime eligibility criteria in nearly a decade.
Key changes
There are three significant changes in the new overtime rules that will take effect in April 2025:
- Rise in minimum salary threshold
The minimum annual overtime exemption salary level has been raised from $35,568 to $55,000 (or $1,059 per week). This would result in those employees who make below $55,000 getting paid 1.5 times the regular pay for working beyond 40 hours, irrespective of their job category.
This reform will enable nearly 2.8 million employees who were hitherto exempted from getting overtime pay to be paid overtime. - Automatic Adjustment of Salary Threshold
The salary threshold will automatically be adjusted every three years, maintaining it in relation to economic conditions and wage increases.
- Changes to the Duties Test
- At least 60% of an employee’s time must be spent doing “exempt functions” in order for them to be managerial, administrative, or professional exempt.
- The “concurrent duties” requirement has been removed, enabling managers who also spend some time doing non-exempt work to be overtime-eligible.
- The “independent judgment and discretion” definition of the administrative exemption has been clarified.
- Professional exemptions will apply only to employees with particular academic training.
These modifications may make about 800,000 workers, especially retail managers, assistant managers, and administrative professionals, eligible for overtime pay again.
Which industries will be most affected?
The new overtime regulations will most affect workers in the following industries:
- Retail sector: Department supervisors and assistant store managers
- Food service sector: Restaurant managers and assistant managers
- Nonprofit sector: Program directors and coordinators
- Healthcare sector: Clinical coordinators, medical office managers
- Financial sector: Junior analysts and customer service managers
- Manufacturing sector: Production supervisors and quality control specialists
Medium-sized companies with 50-500 employees will have the greatest adaptations to these changes, since most of their workers are in the impacted wage ranges.
Potential Employer Reactions
he following are some steps employers can take to meet the new regulations:
- Pay hikes: Increasing the pay threshold for employees to more than $55,000.
- Reclassification of Employees: Changing exempt employees to non-exempt employees.
- Redistribution of workloads: Redesigning operations to minimize overtime.
- Recruitment of more employees: In order to minimize overtime needs.
- Implementing technological options: Implementing time-tracking and workforce management tools.
Approximately 35% of employers intend to offer pay raises, whereas 45% might choose employee reclassification.
How do you check your overtime status?
If you are not currently covered by overtime pay, the new regulations can possibly alter your status:
- Verify pay: If your pay is below $55,000 a year, you might now qualify for overtime.
- Check your responsibilities: In case your position entails fewer than 60% of your time devoted to exempt duties, you could be reclassified.
- Review company announcements: Your company might make such announcements.
- Consult HR: To verify your status.
Timeline for implementation of overtime regulations
- April 1, 2025: Primary rules take effect.
- July 1, 2025: Small business compliance deadline expires (less than 50 employees). – January 1, 2026: Additional record-keeping requirements are in effect.
- April 1, 2028: First automatic wage range change will take place.
Potential impact of new rules
- Positive impacts:
- Increased wages: Wages of overtime-eligible employees could be higher.
- Better work-life balance: Overtime will likely be restricted by many employers.
- More regular work schedules: Benefit from time-tracking mandates.
- Challenges:
- Reduced flexibility: Strict adherence to time needed for non-exempt staff.
- Overtime caps: Some employers limit overtime working.
- Cultural adaptation: Salary staff might need to change over to an hourly-paid system.
Legal complexities and uncertainty
There are also a few legal challenges for this new regulation. Several business associations and 22 states have brought lawsuits regarding these reforms. If the courts change them, the rules may be postponed in going into effect.
Resources for Additional Information
- U.S. Department of Labor website: dol.gov/overtime2025
- Compliance Webinar for Employers
- Wage and Hour Division Help Line (1-866-487-9243)
Conclusion
The overtime regulations that go into effect in April 2025 will make drastic changes in pay schemes and working policies for millions of US workers. Employees and employers need to get ready for such changes in order to experience just compensation and workers’ rights.
FAQs
Q1. Who will be affected by the new overtime rules?
Employees earning less than $55,000 annually ($1,059 per week) will now qualify for overtime pay if they work more than 40 hours per week.
Q2. When do the new overtime rules take effect?
The updated regulations will be implemented on April 1, 2025, with full enforcement starting July 1, 2025.
Q3. How will employers respond to these changes?
Employers may increase salaries, reclassify employees as non-exempt, limit overtime hours, or hire additional staff to comply with the new rules.
Q4. Will my state’s overtime laws be affected by this change?
Federal rules apply nationwide, but some states have more favorable overtime laws. Check your state’s labor laws for additional benefits.
Q5. How can I check if I qualify for overtime pay?
Verify your salary, review your job duties, check company updates, and consult your HR department to determine your eligibility.