The U.S. Department of Labor’s new overtime rule represents one of the most significant compensation shifts in years.
By dramatically raising the salary threshold for exempt status under the Fair Labor Standards Act (FLSA), the rule reclassifies millions of American workers, making them newly eligible for overtime pay.
For HR teams, this is far more than a simple compliance update; it’s a massive operational challenge with deep financial and cultural implications.
The hurdles of implementation vary widely across industries—a tech startup with a flexible “always-on” culture faces a different set of problems than a retail chain with thousands of store employees whose duties must now be meticulously tracked.
Navigating this transition successfully requires foresight and a clear understanding of the potential pitfalls.
To gain on-the-ground perspective, we turned to a panel of seasoned HR experts and business leaders from across industries with one critical question:
“As HR teams update overtime pay compensation in light of recent legislative updates, what is one implementation challenge they could potentially face in your industry?”
Their insights serve as an essential guide for any organization working to align with these new regulations, revealing the key challenges and strategic considerations for a smooth and compliant transition.
Read on!
Martin Weidemann
One of the biggest implementation challenges is adapting legacy payroll systems to handle nuanced, real-time rule changes across multiple jurisdictions—without disrupting operations.
In my own companies, which span across fintech and luxury services in Mexico, this became clear when managing a team with hybrid shifts, bonuses, and on-call structures. Many payroll platforms simply weren’t built for dynamic rules tied to hours worked, variable rates, or multi-role staff.
What made it even more complex was the communication gap between legal updates and HR tech—compliance would change, but systems lagged behind. We had to bridge that manually, often by updating spreadsheets or APIs on the fly. It’s not just a technical issue; it’s an operational one that impacts trust, accuracy, and morale. And for industries that move fast, like tech or aviation, lagging here can mean real legal risk.
Joe Spisak
One significant challenge HR teams in our industry face when implementing updated overtime pay regulations is managing the cost implications across a diverse workforce with varying seasonal demands.
In the 3PL world, we operate in an environment where peak seasons can require substantial overtime hours from warehouse staff. The recent increases in salary thresholds for exempt employees—moving from $684 to $844 weekly, and eventually to $1,128 weekly—create a complex reclassification puzzle that affects operational planning.
I’ve seen firsthand how this impacts our partners. A mid-sized 3PL we work with recently had to reclassify nearly 30% of their warehouse supervisors as non-exempt, dramatically changing their labor cost structure. Their HR team wasn’t just dealing with payroll adjustments—they were navigating employee morale issues as formerly salaried staff adjusted to punching time clocks.
The implementation challenge extends beyond paperwork. It requires recalibrating entire workforce management systems, especially when dealing with seasonal volume fluctuations. Many 3PLs have traditionally relied on flexible overtime arrangements during peak periods, and these regulatory changes force a fundamental rethinking of staffing models.
What makes this particularly challenging is the timing—these changes are hitting during a period when fulfillment operations already face margin pressure from rising carrier rates and warehouse space costs.
For HR teams, it’s not simply about compliance; it’s about implementing these changes while preserving operational efficiency and maintaining service levels for eCommerce clients who expect consistent performance regardless of regulatory shifts.
The most successful implementations I’ve witnessed involve HR partnering closely with operations to model different workforce scenarios, using data analytics to predict impact points, and creating clear communication channels to help employees understand how and why their compensation structures are changing.
Chris Brewer
Managing Director, Best Retreats
Chris Brewer
In the wellness retreat industry, one big challenge HR teams face updating overtime pay due to 2024 FLSA changes is reclassifying exempt employees to non-exempt. Many retreat staff, like facilitators, were salaried above the old $684 weekly threshold but fell below the new $844 (July 2024) or $1128 (January 2025).
Tracking hours for these roles, often involving irregular schedules at remote sites, is a nightmare. I saw a Peru retreat struggle with this—staff felt micromanaged when asked to log hours, tanking morale. Advice? Use simple time-tracking apps like Toggl and train managers to communicate the change as a fairness win, not a demotion.
Andy Danec
One of the biggest implementation challenges we face in the addiction treatment industry when updating overtime pay policies is balancing compliance with continuity of care. At Ridgeline Recovery, our team operates 24/7. Clients don’t stop needing support just because the clock hits a certain hour. That means our counselors, support staff, and medical team often work odd hours, weekends, or get called in during emergencies.
With new overtime legislation, HR teams must rethink scheduling, payroll structures, and staffing without disrupting client care. The problem? You can’t always predict how long a crisis will last. Forcing strict cutoff times or limiting hours to control costs can create gaps in care or lead to burnout if team members feel like they’re being micromanaged around the clock.
We addressed this by investing in better workforce management software—real-time tracking, clear overtime alerts, and smart scheduling based on actual demand. But the real shift was cultural: making sure our staff understood their rights, our obligations, and that any changes in policy wouldn’t compromise the mission.
HR must walk a tightrope. You have to stay compliant, yes—but in healthcare and recovery, you also have to stay human. That’s the challenge.
Joel Miller
President, Miller Pest & Termite
Joe Miller
One big challenge I’ve seen firsthand is adjusting overtime policies for employees who split their time between roles that do and don’t qualify for overtime.
We encountered this issue at a field services company, where some team leads were hands-on in the field part of the week. The rest of the time, they handled scheduling and reporting.
When the new rules took effect, HR had a difficult time determining when those employees were eligible for overtime and when they weren’t. It was a tracking nightmare and led to some underpayments early on, which we had to correct.
We eventually moved to a time-tracking system that let employees categorize their hours by activity type, but even that took weeks of training and buy-in. The key learning was that compliance isn’t just about updating policy—it’s about making sure the tools and behaviors on the ground support it. You can’t rely on memory or assumptions when classifying labor anymore. To stay ahead of these changes, you must design your workflows to reflect the law, not the other way around.
Derek Emery
Being the CEO of Cash for Cars Los Angeles since 1999 and having a 30-plus years of experience in the sphere of business and finance, I have noticed that the HR teams working in the sphere of automotive services have a peculiar problem with adjusting to the new policies of paying overtime: matching the inflexible legislative system with the anarchic pace of the industry.
Our industry is driven by uncertainty unlike the predictable office settings, seasonal peaks (e.g. holiday vehicle sales), post-disaster sudden rise requests, and inventory cycles that rise and fall.
As an example, customer traffic can repair suddenly and double because of one hailstorm, and technicians have to work long hours.
However, new overtime regulations offer tight limits on the number of hours as well as complicated payments calculations, which presents a paradox: limit overtime to meet the regulations, and lose income during busy periods; be flexible, and watch labor costs spiral.
The other potential obstacle that has been ignored is the fragmented workforce in our industry. The auto service positions, techs, sales people, detailers all have different pay structures (salespeople get commissions, mechanics get piece rates).
It is a minefield of compliance to design overtime policies that reasonably take such disparities into consideration.
A survey by the Automotive Service Association (2021) found that 38% of companies are having a hard time retaining skilled technicians; errors in pay transparency may help speed up the process.
Workers may leave in anticipation in case they dread earning less income in the event of new regulations, thus incurring fewer hiring expenses than the cost of conformity.
Finally, there is the integration of technology that makes it difficult. Automation increases efficiency, but watching over AI-generated diagnostics or answering customer portal requests after hours erases the distinction of a regular workday.
Defining overtime applicability to hybrid jobs (ex: a technician who manages robotic repairs) requires imaginative resolutions- something that HR departments seldom have to deal with in non-tech intensive sectors.
Workforce planning, flexible scheduling software, and honest communication are not negotiable when it comes to handling these legislative changes without compromising the quality of service and staff morale.
Mark Niemann
CEO & Co-Founder, MeinOffice
Mark Niemann
One key implementation challenge HR teams may face when updating overtime pay stems from the complexity of aligning compliance with operational agility, particularly in industries like ECommerce and tech-driven services:
Varying job roles: The rapid evolution of hybrid roles in marketing, content creation, and customer experience makes classification under new wage regulations harder.
System integration: Legacy HR and payroll systems often lack the flexibility to adapt quickly, leading to delays or inaccurate calculations.
Talent retention risk: Sudden compensation structure changes can affect morale or prompt dissatisfaction if not communicated transparently.
To mitigate these, it’s essential to:
Andres Bernot
Founder, WOW! Shirts
Andres Bernot
HR departments in the clothing trade encounter a problem linking changes in overtime compensations with varying production patterns in the light of new laws.
We are selling shirts, we work with made-to-order, custom design, so we can rapidly increase workload, especially when there is a seasonal trend.
For example, when some new design is popular we usually have many orders that need overtime. Compensating in such peaks may be complicated.
Without a swift response and clear communication of changes by the HR teams, employees could develop a belief that the system is not fair, which can be dejecting.
To manage that, the HR needs to juggle between the legality and the effective communication so that the employees could feel appreciated and so that there would be no kinks in the working process at such crucial times.
Dr. Kirk Adams
Disability, Equity, & Inclusion Advisor, Innovative Impact LLC
Dr. Kirk Adams
When HR gets overtime policy wrong, it’s not just a payroll issue. It’s a people issue.
Employees with disabilities often work under modified schedules. Some share roles. Others use assistive tech.
These accommodations change how hours get tracked. But most systems weren’t built for that.
They miscount hours. They miss productivity. And they cause underpayment.
Not because of bad intent but because of bad design. That’s where trust breaks. That’s where legal risk grows.
HR leaders must act. Train your managers. Choose systems that flex. Bring in experts who understand disability inclusion.
Compliance is the floor. Equity is the goal. Leadership means knowing the difference and doing better.
Hayley Gillman
CEO, BOTI
Hayley Gillman
The main obstacle for HR teams extends beyond numerical challenges because it involves dealing with human aspects of organizational change.
The change from exempt to non-exempt employee status affects payroll operations while transforming employee perceptions about their work responsibilities. The shift in tracking work hours creates a sense of micromanaging for employees who previously enjoyed flexibility in their work. When communication about compliance updates is not handled properly the process transforms into a perceived demotion for employees.
The key? The solution requires organizations to modify both their policies and employee attitudes. The explanation should include both legal requirements and fair pay principles and employee protection aspects. Managers need training to conduct these conversations while showing understanding toward their team members. Organizations should spend money on tools that provide smooth time tracking experiences instead of creating overwhelming situations.
The actual expense of overtime updates exceeds monetary costs because it damages employee trust.
The HR Spotlight team thanks these industry leaders for offering their expertise and experience and sharing these insights.
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