What Nonprofits Need to Know About the New Overtime Ruling
Nonprofits, take note. This is important!
(This also applies to the for-profit social enterprises we serve too!)
Over the past month, we’ve answered these questions a lot:
How will changes to the federal overtime law will affect my organization?
Do we need to restructure how we pay employees?
When do changes need to be in place?
Do commission and bonuses count toward the salary minimum?
Can you help me calculate and weigh my options? (Of course! Let’s schedule time.)
After explaining this for the umpteenth time last week, our ‘let’s blog about it’ light bulb went off and we started to write. Hopefully, we can provide some clarity and if you want to chat in more detail, just call us at (321) 233-3311.
But first, if you are new to the nonprofit HR or management game, you may want to brush up on exempt verses non-exempt employee status.
THE NITTY GRITTY
[Grab some water, this section is dry]
On September 24, 2019, the U.S. Department of Labor announced a final rule that “updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level.”
Effective January 1, 2020, the rules governing overtime pay for non-exempt workers will change to the following:
The “standard salary level” will go up from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
The total annual compensation requirement for “highly compensated employees” increases from the currently enforced level of $100,000 per year to $107,432 per year;
Employers may now use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
Changes to the special salary levels for workers in U.S. territories and the motion picture industry.
Before we delve into how the new overtime law affects the nonprofit industry, know that not all states have the same guidelines. Quite a few states have salary thresholds higher than the FLSA. For example, California’s ceiling for a non-exempt employee is $49,920. Visit your State Department of Labor before making salary changes.
DID YOU KNOW?
The nonprofit industry now employs over 12.3 million people which is 10% of the US workforce. Even more inspiring to us: according to the 2019 Nonprofit Employment Report From Johns Hopkins Center for Civil Society Studies, “Nonprofit jobs grew almost four times faster than for-profit jobs over the last decade.”
It’s clear that updates to the federal overtime law will significantly affect the nonprofit sector and its employees.
SO, WHAT’S A NONPROFIT TO DO?
Accept the change.
Don’t hyperventilate.
Start thinking proactively about 2020.
Everything will be just fine!
It’s time to evaluate your people resources. The new year is knocking on our door. Take a look at each of your staff member’s compensation and overall staffing structure.
As you do this, consider these 4 questions:
Are your staff members currently being compensated appropriately? This is the very first question to answer because if your employees are classified incorrectly (exempt versus non-exempt), your organization is at risk for fines, legal trouble, staff morale issues and consequently some bad PR. Check out the The Exemption Test from University of Minnesota’s Office of Human Resources. You will also want to evaluate at your employees whose salaries border the new standard salary level. Does it make more sense to pay them occasional overtime pay or transition them into a role that fits exempt status?
Are you leveraging your staff members time efficiently? Every member of our team at Blue Fox has significant nonprofit experience. So, we get it. The industry comes with long hours and we don’t get paid like they do on Wall Street. It’s the feel goods that make us stay! Our philosophy at Blue Fox is that nonprofits should run their back-office operations like a for-profit. Your organization must make efficient use of staff time. (And they will thank you for it). Ask yourself if all of your employees need to attend every after-hours event. Does the office need to open at 8:00 a.m. or would 9:00 a.m. work? Can you shift program calendars for more consistent week to week staffing needs? And, don’t get us started on the time suck of unnecessary meetings?!
Will the changes above affect your ability to provide services? So after reading the second bullet above, you may see a need to adjust how your team is spending their time. But be mindful that any changes don’t affect your ability to provide services. You do important work and it’s not time to compromise the vital resources your community needs. That leads me to the next point…
How will your organization fill the funding gap for staffing cost increases? So, let’s say you’ve evaluated your staffing structure and the ‘thing’ that has to give is simply paying your employees more to maintain the hours they work. We love this option, by the way, but it comes with a cost (pun intended). In this case, you’ll need to figure out how to fund the cost increase. Check this out: A few years ago when the overtime rules were first proposed, our friends at NonprofitAF published this article. We particularly love the section about funders responsibilities. It offers several helpful tips on getting funders on board to support the organization’s changing needs.
Need more help? I bet that your local or regional Chamber of Commerce has information on this matter and they may even be holding workshops or Q&A sessions. Or, consider becoming a member of SHRM. Their members section has a digital FLSA Exemption Questionnaire to help you make the determination if an employee is exempt or not.
2020 is coming quick. If you need additional assistance, Blue Fox is happy to consult with your leadership and we will even take those pesky tasks like bookkeeping, payroll and tax prep off your hands. We do that too! Give our friendly team a call any time at (321) 233-3311 or email hello@yourbluefox.com.
Oops, just went over 40 hours. Gotta’ go!
[The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law.]
Author: Chelsea Clementi, MBA, Director of Marketing & Business Development for Blue Fox
Resources:
Johns Hopkins University, Center for Civil Society Studies 2019 Report
NonprofitAF, Why the new overtime rules are good for nonprofits and thus for our community
The Balanced Careers, Difference Between an Exempt and a Non-Exempt Employee
University of Minnesota, FLSA Exempt and Nonexempt Defined
U.S. Department of Labor, U.S. Department of Labor Issues Final Overtime Law
