Overtime rules are changing. And that means employers need to understand the changes and adapt quickly. Staying compliant isn’t just about avoiding penalties. It’s about maintaining trust and transparency with your workforce. These updates could impact everything from employee classifications to payroll processes, creating challenges for HR teams already juggling many responsibilities.
Here are some essential steps you can take to ensure you’re compliant with the new rules. With planning and the right tools, you can remain compliant without disrupting your business operations.
What Are the New Overtime Rules for 2025?
The 2025 overtime regulations introduce updated salary thresholds for exempt employees under the Fair Labor Standards Act (FLSA), potentially reclassifying workers and making them eligible for overtime pay. The new rule states that employees earning less than $58,656 per year will be eligible for overtime pay if they work more than 40 hours a week. This is the national threshold. In New York State, that number rises to $60,405.50 and to $64,350 in New York City. Employees earning less than the new thresholds will qualify for overtime, even if their duties previously exempted them.
Conducting a Workforce Audit
To prepare for the rule changes, you should conduct a thorough workforce audit. This helps identify potential compliance gaps and ensures employee classifications are accurate.
Start by reviewing all employee roles and confirm if they fall under the exempt or non-exempt classification based on the updated thresholds. Pay particular attention to positions currently classified as exempt but earning near the revised threshold. Misclassification can lead to costly penalties, so accuracy is key.
You should also examine job descriptions alongside actual duties performed. An employee’s classification should reflect their primary responsibilities. If there is any uncertainty, consulting HR experts can help clarify requirements.
An audit isn’t a one-time task. Regular reviews ensure ongoing compliance as roles and regulations evolve. By building this into your HR practices, you reduce risk and maintain confidence in your payroll processes.
Updating Compensation Plans
The 2025 overtime rule changes may require adjustments to your compensation plans to align with the updated thresholds. Addressing these updates proactively helps prevent compliance issues and maintains fair and competitive pay structures.
Begin by identifying employees whose salaries fall below the new threshold for exempt status. For these roles, you have two primary options. You can raise their pay to meet the threshold. Alternatively, you could reclassify them as non-exempt. Either choice may impact your budget, so evaluate the financial implications of both options carefully.
If reclassification is necessary, prepare for the possibility of paying overtime. Implement clear policies and tools for tracking hours worked to avoid unexpected payroll expenses. Time tracking systems with automated reporting can simplify this process.
You should also consider the ripple effects of raising salaries. Adjustments to one role might require increases across similar positions to maintain equity. Take a holistic view of your compensation structure to ensure fairness across your organization.
Finally, communicate these changes clearly to employees. Transparency reduces misunderstandings and fosters trust. By planning thoroughly and taking a strategic approach, you can manage the changes effectively while maintaining alignment with your business goals.
Implementing Accurate Time Tracking
Accurate time tracking is essential for compliance with the new overtime rules. For non-exempt employees, precise records of hours worked ensure payroll calculations are correct, and help businesses avoid disputes or penalties.
Start by reviewing your current time tracking system. If you’re using outdated methods like paper timesheets, consider upgrading to modern solutions. Employee training is also a critical part of effective time tracking. Make sure employees understand how to log their hours and emphasize the importance of accuracy. Managers should also be trained to monitor and address timekeeping issues promptly.
For roles requiring overtime, establish clear policies to manage workloads and prevent excessive hours. You should also regularly audit timekeeping records to ensure compliance and identify any discrepancies. This helps protect your business and reinforces fairness in your workplace. With a strong time tracking process in place, your business can adapt to the new overtime rules with confidence.
Partnering with a Professional Employer Organization (PEO)
Navigating the complexities of the 2025 overtime rules can be challenging, but partnering with a Professional Employer Organization (PEO) can simplify the process. PEOs specialize in managing HR functions, including compliance with regulations. This frees you and your team to focus on other priorities. A PEO can help review your workforce, identify employees affected by updated thresholds, and recommend adjustments to maintain compliance.
PEOs can also provide access to advanced time tracking and payroll systems, making it easier to manage hours worked and overtime calculations. These tools help prevent errors and streamline processes, reducing the risk of non-compliance.
By partnering with a PEO, you gain access to HR professionals who are well-versed on legal requirements and best practices. Their guidance reduces the burden of managing compliance internally and offers peace of mind during regulatory changes.
The 2025 overtime rule changes require businesses to adapt. This means everything from workforce audits to updated compensation plans. Partnering with a PEO can simplify compliance by providing HR expertise and taking administrative burdens off your plate. With proper planning and support, you can manage these updates effectively and keep your business running smoothly.
Need help navigating compliance? Pinnacle can help! We’re here to take care of all your HR needs so you can focus on growing your business. Contact us for your HR Review and Needs Analysis today!