In just about two weeks’ time, the Department of Labor Fair Labor Standards Act overtime rule changes will officially go into effect.
It’s clear, the new overtime rule is going to have an impact on the nonprofit sector. And, having recently spoken at the Nonprofit Finance Summit in Washington, D.C. – just blocks from the White House – I can tell you the impending changes are most definitely on the minds of many nonprofit professionals with whom I spoke.
Barring a future abrupt intervening court injunction or nonprofit sector exemption from the Trump administration, this change will soon be an everyday reality.
This rule was updated to help provide a better work/life balance for salaried employees who may be working lots of overtime without additional compensation. In our recent finance study, 55 percent of finance and accounting professionals say they support this change to the FLSA.
The magnitude of this change for each individual nonprofit organization (NPO) will vary. To determine how it will impact your organization, you need to be proactive – as the clock is ticking.
Here is a 10-point checklist to help you prepare your organization for compliance:
- Determine if your nonprofit organization’s employees are covered under the “Enterprise Coverage” of the Fair Labor Standards Act (FLSA). Employees who work for certain businesses or organizations (or “enterprises”) are covered by the FLSA. These enterprises, which must have at least two employees, are: Organizations with an annual dollar volume of sales of at least $500,00 and/or hospitals or businesses providing medical or nursing care for residents, schools and preschools, and government agencies. Even when there’s no enterprise coverage, employees are protected by the FLSA if their work regularly involves them in commerce between states.
- If Enterprise Coverage doesn’t apply to your NPO, determine which of your salaried employees would be covered (nonexempt) by FLSA protections, which include the new overtime compensation benefits from this rule.
- The Department of Labor has provided a summary doc with specific guidance for all NPO’s – read and bookmark this important document! Here you’ll learn about other types of exemptions for some salaried employees and the critical salary dollar thresholds that are changing.
- Once you’ve scoped out how many of your current salaried employees will be covered after December 1, 2016, then group them together somehow logically (e.g. department, role, etc.).
- Work with the appropriate managers of these employees and understand more about their current work schedules. Here you’re primarily trying to determine how often and how much they may currently be working more than 40 hours per week. Make sure to have them factor in time like working emails at night and working fundraising events.
- Gather those projections and try to model, or at least roughly quantify, how much you would have owed in additional overtime compensation in the last year. Do this by pretending this overtime rule started in the past. Start with the groups which would be impacted the most and work down through your workforce.
- Compare your estimates with your proposed budget for next year. Based on the amount, the scope of those affected from your workforce, and the assumptions you’ve made, it may warrant an executive meeting to talk through your strategy going into 2017. Consulting with a knowledgeable attorney may help clarify and guide you during this organization review period.
- Determine your overall strategy for adapting to the new Department of Labor overtime rule salary level changes. Map out options implementing your strategy for compliance across your workforce and make decisions going into December. Some general options include:
- Raise salaries to maintain employee exemption
- Prepare to pay current salaries with overtime compensation after 40 hours
- Adjust schedules, reorganized workloads, or spread out work hours
- Look at wage adjustments
- Look at converting some employees to hourly positions
- Set new overtime policies for those employees reclassified as nonexempt
- Communicate these changes appropriately to your workforce.
- Ensure you can help salaried, nonexempt employees easily log their time after December 1, 2016. Purpose-built technology, like Abila MIP Fund Accounting, enables you to integrate finance and HR solutions, which can help you directly run payroll in the same system where time is being tracked.
We will continue to explore the impact of this important change going into 2017 so make sure you’re subscribed to Forward Together. We also welcome comments/feedback on this post or via email from nonprofits as you adapt to this new regulation.
For more on this topic, register to attend a live panel discussion-style webinar, Scope of Nonprofit Compliance Complexities, next Tuesday, November 29. Also, if you need a quick primer, read our series of Forward Together blogs on the overtime rule: