The new Fair Labor Standards Act (FLSA) regulations signed into law earlier this year have nonprofits across the country scrambling to make sense of how these changes will impact them and their staff. Starting December 1, 2016, nonprofits will have to pay overtime to certain employees who work more than 40 hours a week but earn less than $47,476 per year.
Nervous? Don’t worry, you’re not alone. Here are a few guidelines for determining how these regulations affect your business and employees:
1. Defining exempt vs. nonexempt employees. Many employees and employers mistakenly believe that employees are “exempt” simply by virtue of receiving an annual salary (versus an hourly wage). This is incorrect. Most positions are considered nonexempt except for “white collar” jobs—those requiring certain administrative, professional, and executive duties AND which pay more than $913 weekly ($47,476 annually). These helpful worksheets from the National Council of Nonprofits will help your organization easily determine which employees are nonexempt or exempt.
These changes will mean huge budgetary shakeups for organizations where employees do not meet the new salary threshold ($913 weekly) to be considered exempt from receiving overtime pay. In particular, if your nonprofit employs workers with professional duties, you may be impacted.
2. Who can receive overtime pay? Only nonexempt employees are eligible to receive overtime pay for working more than 40 hours per week. Nonprofits discovering that many of their employees are nonexempt, and thus eligible for overtime, face three primary choices: bumping up some staff salaries to at least $47,476 per year, keeping nonexempt staff salaries the same and paying those employees overtime, or restricting nonexempt employees’ ability to work overtime.
Nonprofits should analyze their staff’s workloads and determine just how much overtime their employees work on a regular basis. Some employees work far beyond 40 hours each week, while others only do so seasonally for high-demand programs. Employers will need to take on the tough task of revising their 2017 budgets to accommodate these new realities—and keep in mind that, every three years, exempt employees’ salary thresholds will rise per FLSA regulations.
3. Adjusting to FLSA changes is not an either/or situation. There’s no doubt that many businesses in both the for-profit and nonprofit sectors will be significantly affected by the new FLSA regulations. However, instead of seeing these changes as hurdles, consider them challenges to reevaluate the efficiency of your organization.
Some organizations will choose a combination of raising salaries to make employees exempt, eliminating or restricting overtime for nonexempt employees, and budgeting to accommodate for predictable situational overtime. Others will hire part-time workers to help limit overtime among staff members and substantially reassign work so that it is fairly distributed among all employees (which may result in some new hires). There is no one right solution for any organization, so be creative and seek input from other companies in your sector.
It’s important to keep in mind that there are many ways to comply with the new FLSA regulations. While initial budget shifts may be painful, they will go a long way to improve the sustainability of your organization and ensure that workers are being compensated fairly for their efforts.
FLSA Resources for Nonprofits