Navigating the New Overtime Rules for Connecticut Small Business Owners

The U.S. Department of Labor has introduced significant changes to the Fair Labor Standards Act (FLSA), adjusting the salary thresholds for overtime exemptions. These changes will come into effect in two phases, the first raising the threshold to $43,888 on July 1, 2024, and the second increasing it to $58,656 on January 1, 2025. This revision aims to extend overtime pay protections to a broader range of employees, impacting more than 4 million U.S. workers, including those working for small and mid-sized businesses in Connecticut.

Small business owners need to prepare for these updates as they could substantially affect payroll budgets and employee classifications. The updates mandate that employees categorized under the white-collar exemptions (executive, administrative, and professional) must meet the new salary thresholds to remain exempt from overtime pay. If salaries are not adjusted, a larger group of employees will qualify for overtime, leading to higher operational costs.

The decision to increase salaries to maintain exempt statuses or to reclassify employees as non-exempt should be considered carefully. This change could influence workplace dynamics and employee morale, as exempt status often comes with a different set of workplace flexibilities and benefits.

Additionally, the rule incorporates an automatic adjustment mechanism every three years to ensure the thresholds reflect economic changes. This requires businesses to stay vigilant and flexible in their HR and payroll planning.

For small business owners, proactive steps should include:

  • Reviewing employee salaries against the new thresholds.
  • Assessing the financial impact of either raising salaries or managing increased overtime costs.
  • Communicating changes to affected employees clearly to manage expectations.
  • Adjusting payroll systems and policies to comply with the new rules.

As these regulatory changes roll out, advance planning and clear communication will be important to smoothly navigating these, and future, changes. For guidance tailored to your specific business needs, reach out to us for personalized support and advice.

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