Nonprofits across Oklahoma are crunching the numbers and adjusting their budgets to comply with a new federal salary rule. Starting July 1st, the minimum an employee must earn to be exempt from being paid overtime is increasing from $35,308 to $43,888. On January 1, 2025, the salary threshold will jump again, to $58,656. The U.S. Department of Labor estimates that 460,000 nonprofit workers will be affected by these adjustments, and it will cost employers some $44.8 million. In a sector that operates on slim margins, complying with the new rule has the potential to put strain on already overtaxed organizations. The nonprofit sector employs more than 12.5 million people, making it the nation’s third largest employer behind the service and retail industries. Generally, our industry supports boosting incomes for workers, including our own teams, but the practicalities of doing so remain difficult in a state where minimum wage is $7.25 an hour and many leaders of smaller nonprofits may not make more than $50,000 a year. The Department of Labor estimates that nonprofits are more likely than our for-profit counterparts to feel the impacts of the overtime rule. About 19% of nonprofit employees are thought to be reclassified as non-exempt, compared to around 14% of for-profit employees. Because nonprofits cannot pass these increased salary costs along to customers, some might be forced to cut services to make up the difference. These potentially mission-altering decisions come at a time when nonprofits are struggling to retain employees, pay competitive salaries and navigate inflation’s impact on their budgets. Those with government contracts and grants that pay less than it costs to deliver services are already struggling to make up the cost difference through appeals to donors and philanthropists. The new rule exacerbates these budget shortfalls. The new regulations will require nonprofits, and for-profits alike, to adjust and reassess. Organizations will need to look at their staffing practices and get a real sense of how many hours their salaried employees work and how effective they are with their time. The ruling could lead some to find new efficiencies and refresh outdated workflow processes. In the end, I know the nonprofit sector will find ways to adjust while continuing to deliver critical services throughout Oklahoma.