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By NJ Joseph, EAA's Fractional Controller As the warm rays of summer fade and a crisp breeze ushers in October, it’s clear that fall favorites are making their grand entrance. From pumpkin-spiced everything to creative costumes and haunted houses, the magic of spooky season is undeniably in the air. But amidst the delightful chaos of candy corn and ghostly décor lies another important tradition: the final fiscal quarter. While everyone else is busy with tricks and treats, businesses are sharpening their pencils and preparing for crucial year-end deadlines and 2025 budget plans. This year, don’t forget to factor in the new employment laws that are adding a little extra intrigue to the mix! As many of you know, the U.S. Department of Labor rolled out some big changes starting July 1, 2024 that affect exempt and non-exempt employees. Just to review, an exempt employee is someone who is not subject to the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements. Exempt employees are usually paid a salary, and their pay is not based on the number of hours they work. The new law raised the annual salary threshold to $43,888 for salaried employees to be exempt from overtime pay, but the real game-changer is just around the corner: beginning January 1, 2025, that threshold will jump to $58,656. Beginning July 1, 2027, these thresholds will be re-evaluated every three years to adjust for inflation. Currently the state of Texas has challenged this law in federal court, but don't hold your breath for any immediate changes before the January 2025 deadline. In the meantime, it’s smart to get ahead of the curve and make sure your company is in compliance. As you prepare your 2025 budget, here are five important things to consider for managing wage-related expenses under the new rules: 1. Ensure Exempt Employees Meet the Duties Requirements To be considered exempt from overtime, employees must satisfy three criteria:
2. Compliance for non-exempt and highly compensated employees Non-exempt employees are entitled to 1.5 times their regular rate for any hours worked over 40 in a workweek (overtime) under the FLSA. Another change that took place July 1, 2024 is the threshold for the highly compensated employee (HCE) exemption, which increased to $132,964. On January 1, 2025, this rate will increase again to $151,164. This too will be adjusted every three years, beginning in 2027, to account for inflation. 3. Assess Current Employee Salaries Now’s the time to evaluate whether reclassifying employees to non-exempt status makes sense for your organization. 4. Provide Advance Notice of Salary Changes Be proactive! Notify employees about any changes to their compensation and any new responsibilities, such as timekeeping and meal and rest breaks. 5. Stay Updated on Legal Changes Currently, only Texas is affected by the ruling blocking the application of this new Department of Labor law. However, it’s wise to stay vigilant for potential changes in other states! At Elevated Advisory & Accounting, we understand the challenges business owners face while juggling operations and employee needs. Our dedicated advisory team is here to support your success with the insights and resources you need to make informed decisions confidently. Contact us today at [email protected] to discover how we can help you thrive in this ever-evolving financial landscape!
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October 2024
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