One Third of Nonprofits Say Overtime Rules Will Force Staff Cuts

A third of nonprofit leaders predict their charities will cut staff as a result of new federal regulations that expand overtime-pay requirements for some full-time workers, according to a new survey.

Nonprofit leaders generally support expanding overtime pay for their employees but worry about the costs of doing so, according to the survey.

Respondents at nonprofits that receive funding from government grants are especially worried, since their organizations are contractually obligated to provide a certain level of services to the public and limited in how they can reallocate funding to support salaries. Only 13 percent of respondents said government grants pay all of the costs their nonprofits incur for providing services.

The new regulations apply to full-time, salaried employees who make up to $47,476 a year.

Options for Complying With the Law

The National Council of Nonprofits collected survey responses for about one month, two weeks before and two weeks after the overtime rule was published. Of the nearly 1,100 respondents, 57 percent worked for human-service providers, 10 percent worked at arts organizations, and 9 percent worked for education nonprofits. Nearly half of respondents worked for nonprofits that have budgets from $1 million to $10 million.

When asked to pick three adjustments their nonprofits would most likely make to comply with the ruling, 53 percent of respondents selected paying overtime to affected employees. Thirty-four percent said they would reduce staff, 33 percent said they would reduce services, and 27 percent said they would seek new government funds.

Comments that nonprofit leaders made in response to the survey suggest that many organizations’ leaders do not understand how to comply with federal labor laws, according to the National Council of Nonprofits. For example, many said they provide employees with compensatory time instead of overtime pay, a practice that does not necessarily comply with the law.