The new year brings changes, and some significant shifts in employment for 2024 are the increase in salary thresholds for exempt employees and the increase in minimum wage rates across numerous states in the U.S. Businesses must prepare for these adjustments to ensure compliance and maintain operational efficiency.
In this post, we will help you understand where and why these changes are happening, how your company can adapt, and what you can do to smooth the transition.
Changes to Salary Requirements for Exempt Employees
In April 2024, the Department of Labor issued a rule that adjusted the salary requirements for exempt and non-exempt employees. This ruling would go into effect under a two-step process, where:
- As of July 1, 2024, the minimum threshold to qualify for exempt status would be set to $844 per week or at a salary level of $43,888.
- On January 1, 2025, that minimum threshold would increase to $1,128 per week or at $58,656 per year.
Companies can resolve this by either increasing salaries accordingly or shifting affected staff to be non-exempt and update policies to track overtime pay. Any hours worked beyond 40 hours qualifies them for premium pay of 1.5 times their regular rate.
States Increasing Wage Rates
In 2024, 25 states are set to raise their minimum wage, impacting businesses of all sizes. Here are some notable changes:
- Arizona - Raising to $14.35 from $13.85
- Alaska - $11.73 from $10.85
- California - $16.00 from $15.50
- Colorado - $14.42 from $13.65
- Connecticut - $15.69 from $15.00
- Delaware - $13.25 from $11.75
- Florida - $13.00 (effective Sept. 30, 2024) from $12.00
- Hawaii - $14.00 from $12.00
- Illinois - $14.00 from $13.00
- Maryland - $15.00 from $13.25 for employers with 15 or more workers; $12.80 for smaller businesses
- Michigan - $10.33 from $10.10
- Minnesota - $8.85 for small employers and $10.85 for large employers from $8.63 for small employers and $10.59 for large employers
- Missouri - $12.30 from $12.00
- Montana - $10.30 from $9.95
- Nebraska - $12.00 from $10.50
- Nevada - $12.00 (effective July 1, 2024) from $10.25 for employers offering qualifying health benefits; $11.25 for all others
- New Jersey - $15.13 for most employers; $13.73 for seasonal and small employers who have less than six workers from $14.13 for most employers; $12.93 for seasonal and small employers who have less than six workers
- New York - $16.00 for New York City, Long Island, and Westchester; $15.00 for the rest of the state from $15.00 for New York City, Long Island, and Westchester; $14.20 for the rest of the state
- Ohio - $10.45 from $10.10
- Oregon - $1.25 over the standard minimum wage for employers in the Portland metro; $1 less than the standard minimum wage for non-urban counties (Effective July 1, 2024) from $15.45 for employers in the Portland metro; $13.20 for non-urban counties; and $14.20 for all others
- Rhode Island - $14.00 from $13.00
- South Dakota - $11.20 from $10.80
- Vermont - $13.67 from $13.18
- Washington - $16.28 from $15.74
- Washington DC - $17.50 from $17.00
How Your Company Can Prepare Accordingly
Preparing for these wage increases involves strategic planning and carefully considering your current financial landscape. Here's how you can get started:
Learn Your State’s Requirements
The first step is understanding any specific wage requirements in your state that must be enacted beyond exempt statuses. Ensure you are aware of the new rates and effective dates.
Assess which employees will be impacted by these changes and adjust your payroll accordingly. Choose the resolution that works best for you, whether you make employees non-exempt and require them to submit timecards with hours worked or adjust their pay rates to keep them within exempt status. Staying informed will help you avoid compliance issues and potential penalties.
Calculate What Cost Adjustments You Must Make
Once you clearly understand the new wage rates, calculate the overall impact on your budget. Consider the number of employees affected and the extent of the wage increase. Remember that even if many employees fall outside the minimum requirements, you want to maintain employee equity so your low-level and mid-tier employees aren’t paid at the same level.
This calculation will help you understand the additional financial burden and plan your budget more effectively. It may involve adjusting other areas of your business to accommodate these increases.
Look for Cost-Saving Measures
Explore potential cost-saving measures within your organization to offset the increased labor costs. Evaluate your current operations for efficiencies and areas where you can reduce overhead costs. This could involve streamlining processes, renegotiating supplier contracts, adopting new technologies that improve productivity, or finding new benefits providers. The goal is to maintain profitability without compromising the quality of your products or services.
...Or Increase Prices
For businesses operating on thin margins, such as those in the food industry, increasing prices may be the most viable option to manage the rising wage costs. However, it's crucial to approach this strategy carefully. Analyze your market and competitors to ensure your price adjustments remain competitive. Communicate transparently with your customers about the reasons for the price increases, emphasizing the value and quality they receive and noting that these cost increases go toward fairly paying workers.
Turn to a PEO for Help
PEOs are well-versed in employment laws and regulations. They can guide your business to stay compliant with the new wage requirements and help you navigate complex legal landscapes to avoid costly mistakes.
They can handle HR functions such as payroll processing, employee benefits administration, and workforce management. Outsourcing these tasks to a PEO frees up valuable time and resources that can be redirected toward strategic initiatives and core business activities. Additionally, PEOs can help you optimize your workforce through data-driven insights and performance management strategies.
For more insights and personalized assistance, reach out to PRemployer to gain expert advice and learn how they can help you streamline business functions. Start planning today to stay ahead of the changes and secure a prosperous future for your organization.
