Prepare for a significant change in Pennsylvania’s labor landscape as the exempt salary threshold for overtime pay is set to undergo a substantial adjustment in 2025. This long-awaited revision will have far-reaching implications for both employers and employees, prompting businesses to reassess their compensation strategies and workers to anticipate potential shifts in their pay structure.
The current exempt salary threshold in Pennsylvania stands at $25,632, meaning that any salaried employee earning above this amount is exempt from overtime pay. However, the new threshold, effective January 1, 2025, will be set at $45,500, a significant increase of nearly 78%. This adjustment aims to align Pennsylvania’s threshold with the federal minimum threshold of $684 per week, which was last updated in 2004. The move is expected to bring thousands of currently exempt employees under the umbrella of overtime eligibility, transforming the compensation landscape for many Pennsylvanian workers.
The impending threshold adjustment underscores the evolving nature of the labor market and the increasing importance of fair compensation practices. As the cost of living continues to rise, employees expect to be justly compensated for their time and effort. The revised threshold will help ensure that more workers receive overtime pay for hours worked beyond the standard 40-hour workweek, promoting a more equitable and balanced work environment. Employers, on the other hand, will need to carefully evaluate their compensation structures and adjust salaries to comply with the new regulations. Failure to do so could result in substantial financial penalties and potential legal challenges.
Pennsylvania’s Exempt Salary Threshold
In Pennsylvania, employers must adhere to the federal Fair Labor Standards Act (FLSA) and Pennsylvania’s Minimum Wage Act when classifying employees as exempt or non-exempt from overtime pay.
Pennsylvania’s Department of Labor & Industry has established a minimum salary threshold for employees to qualify for the overtime exemption. This threshold is updated periodically to reflect changes in the cost of living.
The current exempt salary threshold in Pennsylvania is $45,500 per year. This means that employees who earn less than $45,500 per year must be paid overtime at a rate of one and one-half times their regular hourly rate for any hours worked over 40 in a workweek.
The Purpose of the Exempt Salary Threshold
The exempt salary threshold serves several purposes:
- It helps employers comply with FLSA and state labor laws.
- It ensures that employees are fairly compensated for their overtime work.
- It prevents employers from misclassifying employees as exempt to avoid paying overtime.
Calculating the Exempt Salary Threshold
The exempt salary threshold is calculated using a formula that considers the cost of living in Pennsylvania. The formula is updated every three years by the Pennsylvania Department of Labor & Industry.
| Year | Threshold | ||
|---|---|---|---|
| 2025 | $45,500 | ||
| 2028 | $47,892 | ||
| 2031 | $50,448### Compliance Considerations for Pennsylvania Employers ####### 1. Conducting Salary Audits #### Pennsylvania employers are advised to conduct thorough salary audits to ensure compliance with the new exempt salary threshold. This involves reviewing the salaries of all employees classified as exempt under the Fair Labor Standards Act (FLSA). Any employees earning less than the revised threshold of $84,000 per year must be reclassified as non-exempt and eligible for overtime pay.#### 2. Reclassifying Exempt Employees #### If a salary audit reveals that certain exempt employees fall below the new threshold, employers must reclassify them as non-exempt. This process may involve: - Notifying affected employees of their reclassification.- Revising job duties to ensure compliance with federal overtime regulations.- Adjusting payroll systems to accurately calculate overtime hours worked.- Providing training to managers and supervisors on the new overtime requirements. To ensure a smooth transition, employers should provide clear communication to employees regarding their reclassification and the reasons behind it. They should also work closely with legal counsel to ensure that all actions taken are in compliance with applicable laws and regulations.#### 3. Other Considerations #### In addition to conducting salary audits and reclassifying exempt employees, Pennsylvania employers should consider the following compliance measures: - Revisiting employee classification criteria to ensure accuracy.- Reviewing job descriptions to ensure they align with actual job duties.- Establishing clear overtime policies and procedures.- Providing training to employees on overtime expectations and how to track hours worked.- Maintaining accurate payroll records and timekeeping systems.Historical Evolution of the Exempt Salary Threshold in Pennsylvania———-### Federal Fair Labor Standards Act (FLSA) Exemption Threshold ###The FLSA is the primary federal law governing overtime pay. It requires employers to pay overtime to non-exempt employees who work more than 40 hours per week. The FLSA exemption threshold is the annual salary level below which employees are automatically considered non-exempt and entitled to overtime pay.### Pennsylvania Minimum Wage Act (PMWA) Exemption Threshold ###The PMWA is a state law that sets minimum wage and overtime pay requirements for employees in Pennsylvania. The PMWA exemption threshold is the annual salary level below which employees are automatically considered non-exempt and entitled to overtime pay under state law.### Comparison of Federal and State Exemption Thresholds ###Prior to 2023, the federal FLSA exemption threshold was significantly lower than the state PMWA exemption threshold. This created a situation where an employee could be considered exempt from overtime under federal law but non-exempt under state law, leading to potential confusion and legal liability for employers. | Year | FLSA Exemption Threshold |
| Year | FLSA Exemption Threshold | PMWA Exemption Threshold | |
| 2021-2022 | $35,568 | $47,892 | |
| 2023 | $60,000 | $47,892 | |
| 2024 | $65,500 | $47,892 | |
| 2025 | $71,500 | $47,892 | |
| Year | Threshold | ||
| 2022 | $68,440 | ||
| 2023 | $72,640 | ||
| 2024 | $76,240 | ||
| 2025 | $80,258 | ||
| Year | Pennsylvania Threshold | Federal Threshold | |
| 2026 | $850 per week | $23,660 per year | |
| 2027 | $925 per week | $23,660 per year | |
| 2028 | $1,000 per week | $23,660 per year | |
| 2029 | $1,100 per week | $23,660 per year | |
| 2030 and beyond | $1,200 per week | $23,660 per year | |
| Key Takeaway | |||
| Review the salary threshold every two years or more frequently if significant changes occur. | |||
| Consider using surveys, market data, and economic indicators to inform your decisions. | |||
| Year | Threshold | Case | Outcome |
| 2019 | $780 per week | PA Business Council v. DOLI | Threshold upheld |
| 2022 | $975 per week | PA Chamber of Business and Industry v. DOLI | Case pending |