Earlier this year, at the encouragement of President Obama, the Department of Labor finalized the most significant update to the federal rules on overtime in decades. The new rules will more than double the salary threshold for guaranteed overtime pay, from about $23,000 to $47,476. Once the rules go into effect this December, millions of employees who make less than that will be guaranteed overtime pay under the law when they work more than 40 hours a week.
Unsurprisingly, some business lobbies and conservatives disparaged the rule as unduly burdensome. But pushback also came from what might have been an unexpected source: a progressive nonprofit called the U.S. Public Interest Research Group (PIRG). “Doubling the minimum salary to $47,476 is especially unrealistic for non-profit, cause-oriented organizations,” U.S. PIRG said in a statement. “[T]o cover higher staffing costs forced upon us under the rule, we will be forced to hire fewer staff and limit the hours those staff can work—all while the well-funded special interests that we're up against will simply spend more.”
Though many nonprofits supported the new overtime rules, PIRG was not alone. (U.S. PIRG declined multiple interview requests for this article.) Over 290,000 comments were posted to Regulations.gov, many of them from nonprofits taking issue with the rule, including Habitat for Humanity, the College and University Professional Association for Human Resources, and the YMCA of the USA.
These responses expose a gap between the values that many nonprofits hold and the way they treat their own staffs. There’s no doubt that nonprofits today face serious financial difficulties and constraints, but do they have no choice but to demand long, unpaid hours of their employees? Putting questions of fairness aside, is their treatment of their workers limiting their effectiveness?
* * *
The answers have a lot to do with how nonprofits survive in an economy that’s geared primarily toward profit. Many nonprofit organizations stare down a shared set of challenges: In a 2013 report, the Urban Institute surveyed over 4,000 nonprofits of a wide range of types and sizes across the continental U.S. It found that all kinds of nonprofits struggled with delays in payment for contracts, difficulty securing funding for the full cost of their services, and other financial issues.
Recent years have been especially hard for many nonprofits. Most have annual budgets of less than $1 million, and those budgets took a big hit from the recession, when federal, municipal, and philanthropic funding dried up. On top of that, because so many nonprofits depend on government money, policy changes can cause funding priorities to change, which in turn can put nonprofits in a bind. (...)
All of this is particularly difficult for human-services nonprofits that survive mostly on Medicaid funding. Homeless shelters, for example, don’t charge for their services, and thus can’t raise prices when their funding is cut. (These types of agencies have a longer period to adjust to the new overtime rules.) And when faced with funding cuts, many nonprofits have no place to turn but their own payrolls.
The pressure from funders to tighten budgets and cut costs can produce what researchers call the “nonprofit starvation cycle.” The cycle starts with funders’ unrealistic expectations about the costs of running a nonprofit. In response, nonprofits try to spend less on overhead (like salaries) and under-report expenses to try to meet those unrealistic expectations. That response then reinforces the unrealistic expectations that began the cycle. In this light, it’s no surprise that so many nonprofits have come to rely on unpaid work.
Strangely, though nonprofits are increasingly expected to perform like businesses, they do not get the same leeway in funding that government-contracted businesses do. They don’t have nearly the bargaining power of big corporations, or the ability to raise costs for their products and services, because of tight controls on grant funding. “D.C. is full of millionaires who contract with government in the defense field, and they make a killing, and yet if you’re a nonprofit, chances are you aren’t getting the full amount of funding to cover the cost of the services required,” Iliff said. “Can you imagine Lockheed Martin or Boeing putting up with a government contract that didn’t allow for overhead?”
Unsurprisingly, some business lobbies and conservatives disparaged the rule as unduly burdensome. But pushback also came from what might have been an unexpected source: a progressive nonprofit called the U.S. Public Interest Research Group (PIRG). “Doubling the minimum salary to $47,476 is especially unrealistic for non-profit, cause-oriented organizations,” U.S. PIRG said in a statement. “[T]o cover higher staffing costs forced upon us under the rule, we will be forced to hire fewer staff and limit the hours those staff can work—all while the well-funded special interests that we're up against will simply spend more.”
Though many nonprofits supported the new overtime rules, PIRG was not alone. (U.S. PIRG declined multiple interview requests for this article.) Over 290,000 comments were posted to Regulations.gov, many of them from nonprofits taking issue with the rule, including Habitat for Humanity, the College and University Professional Association for Human Resources, and the YMCA of the USA.These responses expose a gap between the values that many nonprofits hold and the way they treat their own staffs. There’s no doubt that nonprofits today face serious financial difficulties and constraints, but do they have no choice but to demand long, unpaid hours of their employees? Putting questions of fairness aside, is their treatment of their workers limiting their effectiveness?
* * *
The answers have a lot to do with how nonprofits survive in an economy that’s geared primarily toward profit. Many nonprofit organizations stare down a shared set of challenges: In a 2013 report, the Urban Institute surveyed over 4,000 nonprofits of a wide range of types and sizes across the continental U.S. It found that all kinds of nonprofits struggled with delays in payment for contracts, difficulty securing funding for the full cost of their services, and other financial issues.
Recent years have been especially hard for many nonprofits. Most have annual budgets of less than $1 million, and those budgets took a big hit from the recession, when federal, municipal, and philanthropic funding dried up. On top of that, because so many nonprofits depend on government money, policy changes can cause funding priorities to change, which in turn can put nonprofits in a bind. (...)
All of this is particularly difficult for human-services nonprofits that survive mostly on Medicaid funding. Homeless shelters, for example, don’t charge for their services, and thus can’t raise prices when their funding is cut. (These types of agencies have a longer period to adjust to the new overtime rules.) And when faced with funding cuts, many nonprofits have no place to turn but their own payrolls.
The pressure from funders to tighten budgets and cut costs can produce what researchers call the “nonprofit starvation cycle.” The cycle starts with funders’ unrealistic expectations about the costs of running a nonprofit. In response, nonprofits try to spend less on overhead (like salaries) and under-report expenses to try to meet those unrealistic expectations. That response then reinforces the unrealistic expectations that began the cycle. In this light, it’s no surprise that so many nonprofits have come to rely on unpaid work.
Strangely, though nonprofits are increasingly expected to perform like businesses, they do not get the same leeway in funding that government-contracted businesses do. They don’t have nearly the bargaining power of big corporations, or the ability to raise costs for their products and services, because of tight controls on grant funding. “D.C. is full of millionaires who contract with government in the defense field, and they make a killing, and yet if you’re a nonprofit, chances are you aren’t getting the full amount of funding to cover the cost of the services required,” Iliff said. “Can you imagine Lockheed Martin or Boeing putting up with a government contract that didn’t allow for overhead?”
by Jonathan Timm, The Atlantic | Read more:
Image: welzevoul / Cameron Whitman / Shutterstock / Zak Bickel / The Atlantic
