Funders and the New Nonprofit Overtime Rules


The indispensable blog Nonprofit With Balls has an overview of the forthcoming US federal regulations on employee overtime for nonprofits.

The new rules "affect how we categorize the professionals in our sector—'Exempt' or 'Non-Exempt'—and how we pay them, whether through set salaries or through hourly wages that include overtime for hours worked over 40 [hours per week]."

As part of that overview, blogger Vu Le discusses how funders can be proactive in ensuring a smooth transition to these new regulations for their grantees:

Because we nonprofits cannot pass on these additional expenses on our clients, the way for-profits may be able to, it is critical that funders and donors understand these upcoming challenges and increase their support... Funders in particular, we need your support in the following ways...:

  • Check in with your grantees to see how they anticipate the laws will affect them and chihuahua-820087_960_720how they are doing. It’ll be nice to hear from you. Everyone is stressed, so maybe consider bringing grantees some mini-muffins.
  • Provide emergency funds. By mini-muffins, I mean cold, hard cash. Emergency funds will help nonprofits be able to buffer themselves as the new laws take effect.
  • Increase the level of funding in general. We need you to increase the level of investment, moving forward. Many nonprofit leaders are having even more night terrors than normal, thinking our budgets and all the upcoming challenges. Increase your pay-out rate, and increase your giving amount.
  • Work with grantees to re-calibrate expectations on services and outcomes. If you cannot, or will not, increase financial support, then you must understand that it is unrealistic to expect the same level of services and outcomes, given that most of us will have to cut down staff hours to keep our budgets in line. Help nonprofits figure out if they need to cut back a day of programming, or serve fewer clients, or both. This is not something any of us want, but we may have to do it if there are no additional revenues.
  • Prepare for sticker shock. As James says, “Funders should have internal discussions and prepare grant reviewers for these changes, particularly when evaluating budgets and budget proposals from organizations. We should prepare reviewers to be ready to see salaries for exempt staff at the $47,476 level and above, and not be shocked and give the applicant a lower score. We should create a dialogue where this becomes the new normal.”
  • Consider small, grassroots orgs led by people of color, women, communities of disabilities, rural communities, LGBTQ communities, and other marginalized people. Laws of this nature always disproportionately affect these communities, who will struggle even more than larger organizations that may have more reserve to weather the coming changes.
  • Convene meetings with other funders and with nonprofits. When there are serious changes, such as this one, funders can play an important role by serving as conveners and advocates. Get other funders to be aware of this issue. Get people to talk about these challenges and how to navigate them. It’ll make us all feel better to hear that funders are thinking about these changes and are actively working with other funders and nonprofits to make sure nonprofits and the communities we serve will be OK.

Funders should also consider some of Vu's further points about how this specific regulatory change should be part of a more general change in the sector's culture:

It is not OK or normal to underpay people...

It is not OK or normal to overwork people...

It is hypocritical for us to preach to the world against inequity while perpetuating it in our sector...

That's the funder's digest version. But, as usual, it's worth reading the whole post.

You can also review the new rules at the Department of Labor's website here >>