Washington employers should begin planning now for the next increase to the state’s overtime exemption salary threshold, effective January 1, 2027. Employees classified as exempt must meet both the duties test and the minimum salary threshold to remain exempt from overtime requirements.
2027 Salary Thresholds
Employers with 1 to 50 employees
- $82,321 annually
Employers with 51 or more employees
- $91,468 annually
For larger employers, this is a significant increase from the 2026 threshold of $80,168.40.
What Should Employers Do?
Now is the time to identify exempt employees who fall below or near the 2027 threshold and evaluate your options:
Option 1: Increase Salary
Increase the employee’s compensation to maintain exempt status.
Option 2: Transition to Nonexempt
Reclassify the employee as non-exempt, pay them hourly, and provide overtime pay for hours worked over 40 in a workweek.
Option 3: Salary Nonexempt
Continue paying the employee a salary while classifying them as non-exempt. The employee remains eligible for overtime and hours must still be tracked.
The Decision Comes Down to Hours Worked
The best approach often depends on the employee’s actual workload.
- Employees regularly working significant overtime may be better candidates for a salary increase to maintain exempt status.
- Employees who rarely work more than 40 hours per week may be more cost-effective as non-exempt employees.
Reviewing actual hours worked before making compensation decisions can help avoid unexpected labor costs and compliance issues.
Multi Entity Organizations Take Note
Companies operating through multiple entities should carefully evaluate whether they may be considered a large employer. Organizations with common ownership, shared executive leadership, integrated operations, and centralized HR systems may need to plan for the higher salary threshold.
Start Planning Now
Before January 1, 2027:
- Review exempt employee salaries
- Assess actual hours worked
- Budget for potential salary adjustments
- Evaluate exempt versus non-exempt classifications
- Develop a communication plan for affected employees
A proactive review now can help ensure compliance while giving your organization time to make informed compensation decisions before the new threshold takes effect.