Overview of the New Overtime Wage Law and Its Impact on the Construction Industry

The U.S. Department of Labor (DOL) has announced a final rule raising the Fair Labor Standards Act's (FLSA) minimum annual salary threshold for overtime pay eligibility in two steps.

Will the Overtime Rule Expansion Help or Hurt Workers? Know more

Starting July 1, 2024, the threshold will increase from $35,568 to $43,888 per year, and on January 1, 2025, it will rise to $58,656. This change will significantly impact construction workers and the construction industry, requiring payroll management and adjustments to compliance practices.

A Summary

The changes are expected to expand overtime pay eligibility to millions of U.S. workers. The DOL's 2025 threshold represents a jump of about 65% from the Trump administration's 2019 rule and is slightly higher than the $55,068 mark proposed in 2023.

The threshold will automatically update every three years using current wage data, with the next update occurring on July 1, 2027. However, updates may be temporarily delayed if the department engages in rulemaking to change its methodology or update mechanism.

Impact on Construction Workers

The new overtime wage law is poised to benefit many construction workers, particularly those in managerial or administrative roles who may have previously been exempt from overtime pay. Key impacts include:

1. Increased Overtime Eligibility: More workers will qualify for overtime pay, meaning employees earning below the new thresholds will receive time-and-a-half pay for hours worked beyond 40 in a workweek.
2. Higher Earnings: Eligible employees can expect an increase in their overall earnings due to the additional overtime compensation.
3. Work-Life Balance: With the potential for higher overtime costs, employers may become more vigilant about managing work hours, possibly improving work-life balance for employees.

Impact on the Construction Industry

For the construction industry, the new law brings both challenges and opportunities:

1. Increased Labor Costs: Employers will face higher labor costs as more employees become eligible for overtime pay. This could impact project budgets and overall profitability.
2. Compliance Requirements: Companies must ensure compliance with the new regulations, necessitating updates to payroll systems and practices to avoid penalties.
3. Operational Adjustments: To manage increased costs, employers may need to adjust work schedules, re-evaluate staffing levels, and increase reliance on part-time or contract workers.

The new overtime rule represents another regulatory update for employers, following DOL's independent contractor final rule and the U.S. Equal Employment Opportunity Commission's pregnancy accommodation rule. The FLSA's overtime exemption applies to workers employed as bona fide executive, administrative, professional, and outside sales employees, as well as some computer employees.

The first increase in July 2024 is expected to affect approximately one million workers, while the second increase in January 2025 is expected to affect approximately three million workers. A separate overtime exemption applies to certain highly compensated employees, with the minimum salary threshold increasing to $132,964 on July 1, 2024, and to $151,164 on January 1, 2025.

Adapting Payroll Applications

Construction companies will need to adopt and possibly upgrade their payroll systems to comply with the new overtime wage law.

Key steps include:

1. Updating Payroll Software: Ensure that payroll applications can handle the new salary thresholds and accurately calculate overtime pay.
2. Training HR and Payroll Staff: Staff should be trained on the new regulations and how to manage payroll under the updated law.
3. Regular Audits: Conduct regular payroll audits to ensure ongoing compliance and promptly identify discrepancies or issues.

Lumber Payroll: A Solution for Compliance

Lumber Payroll is a payroll application designed with features that can help construction companies seamlessly adapt to the new overtime wage law. Key features include:

• Automated Threshold Updates: Automatically updates salary thresholds to reflect the latest DOL regulations.
• Overtime Calculation: Accurately calculates overtime pay based on current laws.
• Compliance Reporting: Provides comprehensive reporting tools to ensure compliance and facilitate audits.
• User-Friendly Interface: Easy-to-use interface for HR and payroll staff to manage changes efficiently.

The new overtime wage law will have significant implications for construction workers and the industry at large. By proactively updating payroll systems and leveraging solutions like Lumber Payroll, construction companies can ensure compliance, manage costs, and effectively support their workforce. Adopting these measures will help navigate the transition smoothly and maintain operational efficiency in the face of regulatory changes.