Are You Paying Your Team Overtime?
There is an elephant in the room, which is that for years, the staff at some nonprofits have worked many hours of overtime without pay. If you look at social networking groups, it’s easy to find nonprofit workers who are passionate about the cause and mission. However, in the past, a lot of them also ended up giving away their work.
As a result, there’s also a lot of griping about not getting paid for late nights — for instance, before a big event. Others have complained of having to work on essential projects with tough deadlines, forcing lots of overtime (unpaid) work. Of course, nonprofits employees have a right to complain because no one likes to work for free.
Why Many Nonprofit Employees Don’t Receive Appropriate Compensation
The situation of low nonprofit salary has existed for a variety of reasons. Before the new regulations, Federal Fair Labor Standards Act (FLSA) employees earning less than $23,660 received time-and-a-half for work done over 40 hours in a week. However, anyone making more than that salary did not get compensated, nor was a business or nonprofit required to pay them anything more for working above 40 hours.
Also, nonprofit employees filling essential roles, such as executives or professionals who have duties requirements, had a minimum salary per year of $100,000. While that may seem to be a lot of money, senior staff typically put in a lot of hours. In high-income cities, such as New York or San Francisco, $100,000 isn’t going to get a nonprofit professional very far in terms of a standard of living, compared to those in the corporate sector. Thus, every little bit of money above that threshold helps.
Old Thinking Harms Innovation and Nonprofits
Also, there’s an idea that exists for whatever reason in the nonprofit sector and goes against compensating people well. The nonprofit starvation cycle is the idea, which is still prevalent, that social good groups should have low to non-existent overhead and administrative costs. Yet, the problem with this thinking is that it throttles investment and innovation. Meaning, by paying good salaries, nonprofits hire and retain talented people. As a result, those skilled professionals innovate, grow and develop scalable programs that benefit society. When nonprofits have the money they need to invest in programs and the organization — including salaries — the organization gets better and does better.
What Your Nonprofit Needs to Know About the New Regulations
If you’re a nonprofit leader or board member, there are several things you need to know, so you don’t run afoul of the new rules, which took effect in January of 2020:
- Nonprofits with gross revenues of over $500,000 need to understand the new FLSA rules and obligations.
- As of now, according to the FLSA, you must pay overtime of time-and-a-half to non-exempt employees earning $35,568 or less. Remember, the FLSA requires you to use both salaries and duties to determine if a position is exempt from overtime at your nonprofit. Refer to the U.S. Department of Labor Wages and the FLSA page for more information. (Note: Job titles do not impact whether a position is exempt or non-exempt).
- Highly-compensated employees must now get a salary of no less than $107,432. If you are a leader at a nonprofit with a gross revenue budget of over $500,000, there are a few sources you should consider reviewing. For instance, you can review the Department of Labor’s “Fact Sheet.” Also, the National Council of Nonprofits has an excellent resource overview, which should help you understand the details of the new rules.
Finally, for more detailed information, including record-keeping, the best place to visit is the Department of Labor’s “Handy Reference Guide to the Fair Labor Standards Act.”
Paul D'Alessandro, JD, CFRE, is founder and chairman of D'Alessandro, Inc., a fundraising and strategic management consulting company. He is also a lawyer and a tax law specialist for nonprofits.