New Overtime Rule: 6 Challenges Nonprofits Will Face

September 23, 2016


On May 18, 2016, the federal government announced the final changes to the overtime rule— changes that will impact white collar, non-exempt FLSA workers. This announcement brought about many questions for the future of employees and organizations, specifically non-profit organizations. The changes seemed to impact donations and production for those organizations in this tax classification. Here are six challenges that non-profits could see with the new rules:

  1. Most non-profits will not fall under the ‘enterprise’ section of the FSLA: Most non-profits will feel like they’re in limbo because of the new rule. Non-profits do not appear to fall into the ‘enterprise’ income category provided by the FSLA. Their employees would be covered on an individual level, based on their type of work. This could cause ambiguity when it comes to overtime laws and regulations.
  2. Non-profits will have to choose which options are best for the organization: When it comes to complying with the overtime rule, non-profits have several options. These options include raising salaries above the threshold or paying overtime above and beyond an employee salary.
  3. It costs more to comply with the new law: When a non-profit goes to hire a new full-time employee, they may have to spend more in order to put the employee over the threshold for overtime. To compensate for this change, non-profits might have to raise the cost of their products or services, which means more donations, and more fundraising.
  4. The amount of hours an employee can work per week will change: Non-profit employees are accustomed to volunteering for hours. Many need to work longer hours in order to get the job done. Under the new rules, that is no longer allowed. An employee must account for all hours worked for the organization, presenting a challenge and possible cutback in manpower for the organization. If more employees are needed to get the same amount of work completed, these changes could add to the cost of the organization.
  5. Maintaining services with extra costs: In addition to challenge number three, the organization then has to decide how it can continue operating under the new burdens. In some cases, organizations may have to cut minor services in order to continue with their main base of operations. Deciding how to maintain a high level of service with less funds might be one of the biggest challenges presented by this new law.
  6. Increasing veteran employees’ salaries while increasing incoming base pay: If new employees are coming in at a higher pay rate because of the overtime rule, the question then becomes about how the organization can compensate for the percentage of change for employees that have been working for years. An or ganization could also opt to not change pay at all. This is a challenge that each organization will have to overcome with the new rule.

Overall, these are just a few of the challenges that non-profit organizations will face when it comes to the new overtime rule. Each organization will have to look at their individual circumstance to know what is right for them when it comes to complying with the new terms.

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