The Society for Human Resource Management (SHRM) says new rules on overtime pay pose a risk to charitable organizations as well as businesses.
Elizabeth Hays, a SHRM member and the director of human resources for MHY Family Services, a Pennsylvania-based charity that serves at-risk youth, told the U.S. House Subcommittee on Workforce Protections Thursday that the Obama administration's proposal poses a serious financial threat to her organization because it would force the nonprofit to pay overtime to employees who are currently exempt from overtime pay requirements.
"If these regulations were to be implemented as proposed, MHY will likely have to decrease services because we would not be able to afford the additional overtime pay," she told the committee.
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The proposed rule change would raise the minimum pay at which employees can be exempt from overtime pay to $50,440 a year, more than doubling the current threshold of $23,660.
The change has been floated by the Labor Department and will likely be implemented at the end of a public comment period. While the rule change could be overturned by the Republican-controlled Congress, which is likely hostile to the change, that could then be vetoed by the president, and Congressional leaders would unlikely be able to muster the two-thirds majority needed to override a veto.
Most of MHY's employees make more than the current threshold but less than the proposed one, explained Hays. If the group has to fork over more money in overtime pay, it may have to cut costs in other ways, most likely by reducing benefits or laying off staff. The situation is similar at other charities, said Hays, noting that nonprofit workers typically make less money than their equivalents in the corporate world.
In a statement, SHRM outlined other concerns it has with the proposed policy change, including the potential that employers in lower-paying industries or poorer regions of the country will be unable to afford the increase in overtime pay. SHRM also suggested that increases in mandated pay will lead to employers awarding fewer discretionary pay increases, leading to "salary compression."
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