The Department of Labor has recently announced significant changes to overtime regulations. For small business owners, understanding these shifts is not just about compliance—it’s about financial planning.
The New Thresholds
Starting January 1, 2027, the salary threshold for overtime exemption will increase. This means employees earning below the new cap must be paid time-and-a-half for any hours worked over 40 in a workweek.
“Compliance is not just about following rules; it’s about building a culture of trust and fairness within your organization.”
Who is Exempt?
To be exempt from overtime pay, employees generally must meet three tests:
- Salary Basis Test: The employee must be paid a predetermined and fixed salary.
- Salary Level Test: The amount paid must meet a minimum specified amount.
- Duties Test: The employee’s job duties must primarily involve executive, administrative, or professional duties.
Warning
Failing to reclassify employees correctly can result in back-pay lawsuits that go back up to 3 years. Double check your classifications now.
Action Plan for Employers
We recommend a 3-step audit process for all our clients:
- Review all job descriptions.
- Audit current payroll data against new thresholds.
- Communicate changes to affected employees transparently.
LikelyHR can automate this entire process for you. Our compliance engine updates automatically whenever federal or state laws change.
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