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Major Overtime Changes to Affect Nonprofits

Did you hear? Dec. 1 marks the start of new overtime rules and nonprofit organizations need to be prepared.

As of Dec. 1, under directive of the President and in accordance with the Fair Labor Standards Act (FLSA), the minimum salary for employees to be exempt from overtime will double to $47,476 ($913 weekly) when they work more than 40 hours a week.

Previously, many employees were exempt from being paid overtime by virtue of their status as executive (or supervisor), professional, or administrator with an annual wage of at least $23,660 ($455 weekly).

These “white collar” exceptions are also known as the duties test. In each case, the employee must receive a salary of at least the exempt threshold amount. Elements of these exemption definitions can be located on the Department of Labor (DOL) website.

The new rule means nonprofits must determine how to remain competitive employers and viable nonprofit organizations while still staying within the law.

The “ministerial exemption” established in 2004 states “teachers, doctors, lawyers and clergy are not covered by the FLSA.” But no exception exists for employees of religious organizations who don’t perform primarily ministerial services.

Per DOL, you’re given a few options to abide by this new rule:

  • Pay time-and-a-half for more than 40 hours per week
  • Raise workers’ salaries above the new threshold
  • Limit workers’ hours to 40 per week (If that restriction reduces performance, you may need to hire more workers.)
  • Some combination of the above (Treating some employees differently than others.)

Be sure to choose what’s best for your nonprofit organization. You can visit ComplianceHR and use the free tool offered to compare the cost of giving salary increases, paying overtime and adjusting pay rates so employees make the same each week/year even with overtime pay.

Although cost is the primary concern, you should be prepared to deal with potential morale issues—how will staff who never “punched a time-clock” feel when you give them time-cards? Consider implementing a robust internal communications plan with the help of a professional PR consultant.

This change received so little publicity that we believe many nonprofits will be blindsided. Now’s the time to review your human resource policies, compensation structure, recordkeeping procedures and employee files to see what changes you must make.

The Online Stewardship Accounting & Consulting Services team is here to help. Contact us at Lynn@OnlineStewardship.com or 904-398-4747.

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