Payroll Briefs

U.S. DOL Proposes Increase to Minimum Salary for Exempt Employees

September 19, 2023

In a move that could impact millions of Americans, the United States Department of Labor (DOL) has proposed a significant increase to the minimum salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). The long-anticipated proposal has the potential to bring about significant changes in the way employees classify their employees and compensate them for their work.  

If finalized, this rule would increase the minimum salary amount required to be paid to executive, administrative and professional (EAP) employees and highly compensated employees (HCEs) for these employees to be considered exempt from FLSA overtime pay requirements. The proposed rule does not include any modifications to the standard duties test used to distinguish between FLSA-exempt and non-exempt employees.  

The Proposed Increase 

The DOL’s proposed rule aims to raise the minimum salary threshold for exempt employees, making more workers eligible for overtime pay.  

 Current  Proposed
The minimum salary required to be paid to an EAP employee for that employee to be exempt from the FLSA overtime requirements $684 per week, ($35,568 annually)$1,059 per week, ($55,068 annually*). 
The required annual compensation level for HCEs $107,432 $143,988

*The DOL has based these numbers on current earnings data. Actual amounts will be based on earnings data as of the date the final rule takes effect, which may be higher than indicated in the proposed rule.

If passed, this increase would extend overtime protections to approximately 1.3 million American workers who currently do not qualify for overtime due to their exempt status. This change is part of the DOL’s efforts to keep pace with inflation to keep FLSA rules as an effective tool in protecting workers’ rights. The proposed rule is open for public comment for 60 days from the August 30 announcement. The DOL will then issue a final rule, which is expected to take effect sometime in 2024. 

Missing from the proposal are any changes to the existing regulations allowing up to 10% of the minimum salary requirements to be satisfied by payment of nondiscretionary bonuses, incentives or commissions paid annually or more frequently.  

Next Steps 

There is no immediate action required at this time. Employers should determine which employees may be impacted by the final rule, taking into consideration any state law requirements. If a state law is more protective, then state law must be followed.  

The proposed rule will go into effect 60 days after the publication of a final rule in the Federal Register. However, legal challenges to the rule are expected. The DOL has created a FAQ page to answer specific questions regarding the proposed ruling.  

At DM Payroll Solutions, we keep you abreast of the latest laws and regulations impacting related payroll obligations. Contact us today to learn how our software can help you quickly and seamlessly integrate any necessary changes to workers’ wages.