Your premier HR partner
Let us take on your HR functions so you can strive for greatness.
Contact us.
Will FLSA Final Rule changes greatly affect your bottom line?
Will 2025 FLSA Final Rule changes greatly impact your bottom line?
What recent Fair Labor Standards Act (FLSA) rulings mean for your business.
Were you caught off guard by the Final Rule changes to the Fair Labor Standards Act (FLSA) that took effect in July 2024? You know, the rule that increased the overtime threshold for non-exempt employees from $35,568 ($684 per week) to $43,888 ($844 per week) per year?
Maybe you’ve heard about even more changes on the horizon and are wondering how they might impact your business and employees.
With Syndeo as your PEO partner, you can rest easy. We closely monitor these types of changes and other legislative updates to ensure you stay fully informed and prepared.
In this post, we’ll break down the FLSA, its purpose, the latest updates, and how Syndeo keeps you ahead of the curve. Let’s dive in.
The Fair Labor Standard Act (FLSA), enacted in 1938, establishes federal labor standards in the U.S. Some states may have additional labor laws that must be followed, but those state laws are not included in the FLSA.
While the FLSA has been amended several times, it continues to be a vital piece of legislation regulating workplace practices. Employers and business owners need to be aware of its basic tenets to remain compliant with its required regulations.
Key Components
The FLSA is sometimes known as the Wage and Hours Bill, as it established the Wage and Hour Division of the U.S. Department of Labor to enforce the legislation and ensure these foundational labor standards are met. While there are a few exceptions and exemptions, it applies to employees working for companies involved in producing, handling, selling, or working on goods that are part of interstate commerce.
The FLSA was established to protect workers by ensuring fair pay and proper treatment in the workplace. Its provisions prevent employees from being subjected to excessively long hours without appropriate compensation.
By setting consistent labor standards across industries, the FLSA also helps prevent businesses from gaining an unfair advantage through underpayment or overworking their employees. Beyond benefiting workers, the act promotes fair competition within the marketplace so that all businesses adhere to the same labor practices.
One of the many benefits of partnering with Syndeo is that you don’t have to be an expert on the federal policies and regulations. You count on Syndeo to be the experts on legislation like the FLSA and know that your HR Business Partner will inform you of policy changes affecting your company and workers.
One of the first tasks Syndeo does for new clients is an FLSA audit. We look for any red flags that would trigger a deeper look from the DOL, like employee misclassifications, duties tests, and salary base compliance.
Suppose you have employees whose duties qualify them as non-exempt employees, such as a technician, but you are paying them a salary instead of an hourly rate. In that case, you could be violating the FLSA. Generally, technician positions do not meet the requirements for exempt status.
We help identify these types of errors and offer solutions to correct them that benefit both the company and the employees.
At this point, let’s clarify some common FLSA terms: exempt and non-exempt employees. This lingo easily gets mixed up for people who do not deal with the FLSA every day.
Exempt employees are those who pass the duties test and are paid a yearly salary equal to or greater than the federal set minimum. These employees do not qualify for overtime provisions and usually include executives, administrators, professionals, and outside sales roles.
Non-exempt employees are eligible for overtime pay at “time and a half” their regular pay rate as outlined by the FLSA because they are paid hourly. An employer must pay for any additional hours worked above 40 in an established seven-consecutive-day week at the 1.5 times rate.
The duties test is a close evaluation of the nature of job responsibilities employees engage in daily that is used to determine if an employee qualifies as exempt. To qualify for exemption, certain roles must meet specific criteria related to job duties and salary levels.
Syndeo helps our clients evaluate their employees’ job descriptions and duties to ensure every employee is appropriately classified as the FLSA defines. For instance, returning to the previous example, if you have salaried technicians on your team, it often raises a red flag for us since technicians typically don't meet the criteria to pass the duties test. If those technicians have worked more than 40 hours a week, they could file a claim with the Wage and Hours Division and might be entitled to back pay.
The Final Rule, announced on April 24, 2023, raises the salary threshold for exempt employees or requires business owners to convert the affected positions to hourly pay. It seeks to not only help lower-salaried workers earn more for their time, but it also positions highly compensated exempt employees to be able to receive overtime protections. Highly compensated employees must earn the standard salary in base pay but could also be compensated with annual bonuses, commissions, or other performance-based incentives.
The first increase took effect July 1, 2024, and required standard salaried employees to make $43,888 per year ($844 per week). For employees not meeting that requirement, employers faced two options: increase base salaries to meet the new threshold or convert these employees to an hourly rate, subsequently making them eligible for overtime pay. Since these decisions affect the overall health and sustainability of the business, many Syndeo clients have turned to us for guidance in making the best decisions for both their business and their employees.
Additionally, the Final Rule will increase the salary thresholds again starting January 1, 2025. Beginning the first of the year, the new standard salary threshold will be $58,656 per year ($1,128 per week), a considerable jump in base pay. Beyond that, the new ruling also states that these thresholds will be evaluated every three years to ensure they keep up with increasing cost of living standards.
While this base pay hike could challenge some businesses, those proactively planning and exploring employee options will be better equipped to handle the impact and smoothly adapt to the changes without disruption.
Although the Final Rule is currently facing legal challenges, employers must be prepared to act if it is upheld, ensuring compliance with the updated salary thresholds and adjusting payroll practices as needed. As your trusted PEO partner, we're closely monitoring the status of the rule and are ready to assist with calculations to determine the best course of action for your business and employees.
Reach out to your Syndeo HR Business Partner today to discuss how the Final Rule updates could affect your organization.
Don’t forget to like, share, and subscribe to our newsletter for more thought-provoking HR content from Syndeo. To learn more about how outsourced HR services can get you back to business, contact Syndeo today!
Let us take on your HR functions so you can strive for greatness.
Contact us.
