News

According to many recent reports and articles, turnover may be the new normal for NPOs. In a society where the average number of careers changes in a person’s lifetime is reportedly 5-7, this may not be shocking news. But recent turmoil in nonprofit hiring and employee satisfaction has nonprofit leaders in a quandary. Can we embrace this new normal but also shift our practices to increase employee satisfaction?

According to the Chronicle of Philanthropy: “Four out of five charity workers are actively seeking new positions—or would be if the economy were stronger, according to the survey of 672 people. Nearly 40 percent of employees said they are dissatisfied with their work.”

Much of the dissatisfaction is a result of the economy adding new pressures to employee workload. With fewer employees to do the same amount of work or more, positions are becoming less specific and more generalized, giving employees little sense of accomplishment or ownership over their work. In addition, loss of a sense of job security has given many nonprofit workers reason to seek employment elsewhere. Finally, under-appreciation of employees has set them up to under-achieve and potentially just leave.

Joanne Fritz, writer for the About.com Guide for nonprofits, says in her recent post: “What these employees want is what all workers want, whatever sector they work for: professional development, the chance to advance, clear expectations from managers, participation in the decisions that affect them, and a feeling of being valued.”

If the nonprofit sector is going to thrive in this new normal, the new nonprofit employee will need more out of their position than just the feel-good nature of their work. Leaders and human resource professionals at these organizations will need to:

1. Provide Education. Giving employees a chance to hone their skills and build management know-how will not only give them a sense of relevance and job security, but it will refresh your NPO’s overall strategies and outlook.

2. Recruit Wisely. “Make employee recruitment an ongoing activity” says Fritz, so that your organization stays aloft regardless of turnover. And to reduce turnover, new tools like online assessment tests can help ensure you’re finding the right candidates.

3. Give Feedback. Being involved in your employees’ performance, providing rewards and discipline, helps them feel like they are part of a greater mission. By documenting performance, you can also save your organization from suffering from inappropriate unemployment claim costs down the line.

4. Embrace Technology. Giving employees opportunities to work from home with cloud technology and utilizing new online and social media tactics will help employees feel they are working for an organization that stays ahead of the curve and appreciates new ideas.

5. Be Flexible. When compensation dollars are limited, you can boost morale by using other incentives like quality of work life rewards and training opportunities.

Nonprofits who rely on state and other government funding should prepare for a bumpy road ahead in the next couple years says a new report produced by independent philanthropy consulting firm “Changing Our World, Inc.” Although the economy is seeing a shift toward the positive, state tax revenue – and therefore funding for many nonprofits – is nowhere near stable. And while the number of nonprofits has been steadily rising over the past 15 years, charitable giving has dipped significantly and would need an unprecedented rally to make up for the government funding shortfall.

Since World War II, the average recession in America had lasted 10 months. Until Now.”

Unemployment alone has created a crisis in many states. In fact, 44 “crisis states” have significantly reduced spending and are expected to cut spending even more (by $38.5 million) in social services, education and Medicaid says the report. Despite $1.5 trillion of American household wealth lost in just the first three months of the recession, philanthropy on the other hand, has been making modest gains and is expected to slowly trend upward. But the dollars are spread thinner as the number of nonprofits increases and the demand for services explodes. As the Chronicle of Philanthropy put it: “To help nonprofits cover cuts in those services, households in the hardest-hit states would have to step up their giving by 30 percent in 2011 and 60 percent in 2012—an increase the report says would be ‘historically unprecedented.’”

So what’s a nonprofit to do?

The report concludes that a multi-faceted strategy is needed for every nonprofit. Waiting on philanthropy or government funding to recover won’t work. “Philanthropy will be an important, indeed critical piece of that strategy, in part because philanthropy is often flexible and can fill in gaps not financeable through other means. However, the sheer weight of the burden will require that multiple revenue pathways be opened as well as that every managerial option for efficiency be considered.”

For nonprofits looking for a guide to this multi-pronged approach, we gleaned these tips from the report:

• Efficiency – Reach out to unemployed workers to become volunteers, possibly with a stipend. You’ll not only give them a step in the right direction but you’ll receive valuable man-hours.
• Collaboration – Reducing overhead costs is possible through a number of collaborative efforts like merging of back offices, joint purchase of property, combination of nonprofits with similar programs into a single service network, etc.
• Messaging - When asking for donations, emphasize progress instead of crisis. Talk about all the good the organization is doing in the face of the economic crisis, not how it’s struggling.
• Financial Expertise – Learn more about managing cash flow and accounts receivable so you can weather late payments and financial dips. Become your own expert on economic trends. Also think about adding people to the board with financial expertise or government experience.
• Don’t Rely on One Source – No more than 60% of any program’s budget should come from government money.
• Maintain a Reserve – This fund should be triggered only by the Board or the Finance Committee, and saved for lean times.

SUMMARY:  Partnership provides potential savings for nonprofits in Georgia during times of rising costs, reports the Unemployment Services Trust.

Santa Barbara, CA.  December 06, 2011 - The Unemployment Services Trust (UST) and Aging Services of Georgia are pleased to announce they are entering into a partnership to offer a new member benefit to nonprofits in Georgia: saving money on unemployment expenses.

Aging Services of Georgia is a statewide association that represents nonprofit and mission-driven organizations dedicated to providing quality housing, health care and community-based services.  Aging Services of Georgia consists of over 150 housing and service providers that proudly embrace the continuum of aging services, representing over 126,000 residents and clients in Georgia.

With Unemployment Insurance (UI) taxes continuing to rise across the United States, it works to the benefit of most nonprofit organizations to consider opting out of the state unemployment tax system in an effort to reduce operational costs.  The current maximum tax rate for employers in Georgia is 7.29%, up from 5.40% in 2008, and these rates will continue to rise until the economy stabilizes.  Opting out of the state unemployment tax system is allowed by federal law for 501(c)(3) organizations and can help nonprofits keep more funds to put toward their mission.

Employers who pay into the state unemployment tax system typically pay in $2.00 for every $1.00 for paid out in benefits.  And, last year alone, Georgia erroneously paid out unemployment benefits by an estimated $53.6 million, so there are a lot of funds going to waste.  Opting out classifies nonprofits as a direct reimbursing employer, where the organization repays the state dollar-for-dollar when an unemployment claim is filed against the organization.  In becoming a direct reimbursing employer, organizations have the options to monitor and protest claims on their own or join an unemployment trust.  Handling unemployment claims within the organization can be burdensome on Human Resources departments, so many nonprofits choose to join an unemployment trust because they can provide claims monitoring services as a benefit of becoming a member.  With UST, organizations make quarterly deposits into a reserve account that is owned by the organization.  When unemployment claims arise, UST reimburses the state with funds from the organization’s reserve, which will be replenished through future contributions.

UST, a grantor trust founded in 1983 by nonprofits for nonprofits, is the largest national unemployment trust with more than 2,000 member organizations.  UST’s long-standing association with 501(c)(3) nonprofit organizations provides an average annual savings of $35 million in claims and has provided over $33 million in refunds to trust members.

For more information about UST, visit www.ChooseUST.org or call (888) 249-4788.  You can also visit Aging Services of Georgia on the web at www.AgingServicesGA.org.

You’ve already tightened your belt. But now constrained public funding and highly competitive government grants are making sustainability harder than ever for nonprofits, especially those in the human services sector. We think this recent article from the Stanford Social Innovation Review is a great read for nonprofits suffering from funding cutbacks. The article provides guidelines on how to stay afloat during these times, including these five ideas:

1) The importance of strategic clarity and the steps your organization should take to focus on priorities

Nonprofits across the globe offer a wide variety of services. Defining how, where and with whom you have an impact will assist you in finding your niche, and also help you with your funding efforts. From here, nonprofits should define how much it costs to provide each service offered by the organization so you can seek the proper funding needed to keep the program afloat. This allows the agency to locate areas of service that may be altered if funds are lacking and show what areas of the service would benefit the most if funding were increased. Also, focusing on strategic clarity aids the organization in decision making and how you can pursue opportunities for government funding.

2) Diversifying government support streams and how to manage a strapped funding environment

Organizational sustainability is of the utmost importance, so it is imperative that organizations not have all of their funds coming from just one source. Allowing funds to funnel in through multiple sources (government agencies, state programs, donors) can help your organization remain stable amid declining revenues. Nonprofits may consider offering services in different locations or offering their services to others who may benefit from them (for example, offering services for children with behavioral disorders in a school setting, to children with behavioral disorders in foster homes). Organizations can also take contracts that may not cover all of the costs involved with a particular service if there is potential for making up the difference in community support.

3) Improving productivity, efficiency and effectiveness

A notable difference between the for-profit and nonprofit market place is that nonprofit organizations rarely get to name their price when trying to earn a contract. And, since the funds provided don’t always cover the costs required to carryout the work needed, nonprofits find themselves trying to work more efficiently and effectively in order to preserve funds for the future. Many organizations are becoming more tech-savvy and investing in technologies that streamline job processes and free up valuable man hours so they can focus more on “big picture” tasks.

4) Measuring outcomes and utilizing reports to drive internal learning

Many times, nonprofit organizations generate reports to show the results of their efforts to external parties in order to prove they are satisfying funder requirements, government expectations, etc. Measuring outcomes can be a valuable tool in educating internal associates of program productivity and how certain aspects of those programs can be tweaked in order to improve results. Measuring outcomes can also show whether or not a certain program is producing its intended results, ultimately aiding in overall organizational sustainability.

5) Moving beyond “vendorism” and viewing government decision makers as customers

When nonprofit organizations work with government decision makers, keeping in mind that the government is the buyer and the nonprofit is the seller, nonprofits can better position themselves to mold the government’s request for proposals. As Patrick Lawler, CEO of Youth Villages, stated, “We find out where the leadership’s biggest needs and challenges are, and then look at what services we have that can help them solve the problem. We look over every word in new state budgets and the statements made by the governor or head of child welfare services, and put together a plan for how to address the needs identified.”

“If there is one lesson the nonprofit sector has learned in the past few years, it is the value of maintaining healthy reserves,” says Hilda Polanco in a recent article from Philanthropy Journal.

Here at UST, where we help our members create reserves to pay unemployment claims, we couldn’t agree more.

But finding those unrestricted dollars to fund a reserve is easier said than done. However, it is a necessary step in managing sustainability – a lesson all too clear to many nonprofits during the recent economic downturn. Ms. Polanco provides some insight into how nonprofits can start building their operating reserve. Here is what we learned:

1. Start with nurturing a culture (all the way up to the Board) that strives to produce revenue and surpluses – not just “breaking even”

2. Next, when creating your budget, insert a line-item for “Current Year Contribution to Reserves” so that it is a clear priority for both management and staff.

3. Finally, there must be a reserve policy that states when reserves should be accessed, and defines “when is it a ‘rainy day’?” or “what constitutes an emergency?” This will provide the purpose of the reserves based on your organization’s own individual mission.

Overall, says Polanco, the board should figure out “how much of its unrestricted net assets to make available for management to use as needed (“Operating Reserve”), how much to set aside for a rainy day (“Board Designated”) and how much to earmark for a specific strategic goal (“Special Purpose”).” A reserve is not something that will appear overnight, but by taking these few steps your nonprofit will be on its way toward being a stronger, more stable organization.

SUMMARY: Businesses in states with unemployment funds remaining in a deficit for two consecutive years will not receive the benefit of FUTA tax credit, spelling higher taxes for employers, reports the Unemployment Services Trust.

Santa Barbara, CA. November 21, 2011 – With chronic unemployment lingering across the U.S., many state unemployment funds are long past being able to support laid off workers without the help of Uncle Sam. These states, whose unemployment funds were depleted during the recession, took out Title XII loans from the federal government to continue paying unemployment benefits. Now with current outstanding balances totaling $37.4 billion, the Fed is eager to see some of this money paid pack. Based on Title XII of the Social Security Act, employers will be tapped for these funds through a FUTA credit reduction, reports the Unemployment Services Trust (UST).

Under the Federal Unemployment Tax Act (FUTA), typically employers pay an annual FUTA tax rate of only 0.6% because the 6.0% tax rate is offset by a federal credit of 5.4%. (The tax was 6.2% for a net tax of 0.8% previously; but the 0.2% surtax passed by Congress in 1976 finally expired June 30, 2011). However, by law, after a state has had an outstanding Title XII loan balance for two consecutive years on January 1, employers in that state face a 0.30% reduction in the FUTA credit if the loan is not paid back by November 10 of that same year. In 2010, three states had outstanding balances for more than two years that could not be paid back by the November deadline. Indiana, Michigan and South Carolina employers saw their FUTA tax rate go up by 0.3% retroactive to January of 2010 because of the credit reduction. Now, a year later, seven times as many states face a FUTA credit reduction. Employers in 21 states will see their federal unemployment taxes rise this year.

- Nineteen new states will have a credit reduction of 0.3%: Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Pennsylvania, Rhode Island, Virginia, Virgin Islands and Wisconsin.
- Michigan will have a total credit reduction of 0.9% (0.6% in 2010)
- Indiana will have a total credit reduction of 0.6% (0.3% in 2010)
- South Carolina qualified for credit reduction avoidance, so they will not have a further credit reduction for 2011.

This means that for employers in the 19 states newly experiencing this credit reduction, the federal unemployment tax rate will increase from a net 0.60% to 0.90%. These taxes will be due in January 2012 based on the first $7,000 of wages paid to each worker, retroactive to January 2011. So while other employers pay $42 per employee in federal unemployment taxes, employers in credit-reduced states will now pay $63 per employee.

For each subsequent year that the loans remain unpaid, employers will see a further 0.3% credit reduction. By 2014, they could face a 1.8% net federal tax rate if the state still has not paid back the loan. This year Michigan will see a net tax rate of 1.7% and Indiana will face 1.4% because of their prolonged outstanding loan balance. The federal FUTA tax is paid in addition to the state unemployment taxes that each employer pays on a quarterly basis.

The widespread credit reduction means that more employers will be wary of hiring as they seek to reduce costs – further compounding the unemployment problem. Only 501(c)(3) organizations are exempt from FUTA taxes. However, even these nonprofit organizations could feel the effects in the form of increased state unemployment taxes. In an effort to pay back their outstanding loans, many states will increase their unemployment taxes and taxable wage bases over the coming years as well. Already in 2010 employers saw a 34% national average tax hike, followed by an expected 16% again this year – and these tax rates won’t likely go back down again.

State unemployment funds have been historically under-funded, which is how they got here in the first place. For example, from 1938 to 1973 unemployment reserves lingered around 5% of wages, never dropping below 2%. That average fell to 1% in 1974 and hasn’t reached 2% ever since, meaning state UI funds have had the slimmest of financial buffers, let alone a buffer that could withstand a prolonged surge in unemployment like the one caused by the recent recession.

Even though states have tried to find ways to pay back their Title XII loans (and the $1.3 billion in interest that was due starting on September 30, 2011) without increasing taxes on employers, they are only putting off the inevitable. For example, debt-laden California appropriated money from its General Fund to pay the interest due on its loan instead of raising taxes on employers. This was a common practice among many states this year. While employers can thank the state for now, the fact still remains that the California taxable wage base is only $7,000, which is the lowest possible taxable wage base (states must match or exceed the federal taxable wage base to avoid substantially higher FUTA rates). They are among the 32 states whose taxable wage base remains below $15,000. There is a proposed increase in the FUTA taxable wage base for 2014, however, that would increase the minimum to $15,000 for all states. California taxes could more than double if the proposal passes. This is just one example of how states that have put off raising taxes for decades could face a substantial “correction.” Hawaii employers, who were shocked by a record taxable wage base increase of $21,200 last year (from $13,000 to $34,200) would probably agree that this type of sudden rise in taxes is hardly desirable. But it will be necessary if states cannot adjust their unemployment fund practices to pay off their loans and create sustainable reserves.

In the short term, states will have to make immense efforts this year to avoid another credit reduction for employers in November 2012. According to the DOL, to avoid a FUTA credit reduction for a taxable year, a state must submit an application to the Secretary of Labor prior to July 1st, and the state must:

- Pay the amount that the credit reduction would produce prior to November 10th of the year for which avoidance is to apply
- Repay all loans received during the one-year period prior to November 10th

- Increase solvency for the taxable year through legislative action by an amount equal to or greater than the amount of the FUTA credit reduction
- Not borrow before the next January 31st

A recent article from the Society for Human Resource Management (SHRM) projects sustained labor market struggles for November in the manufacturing and service industries, citing its Leading Indicators of National Employment (LINE) survey report. SHRM’s LINE report studies employer hiring expectations, new-hire compensation, difficulty recruiting top-level talent, and job vacancies. According to the article:

- New hiring is expected to drop in the manufacturing and services industries
- The index for recruiting difficulty rose in both sectors compared to 1 year ago.
- The rate of increase for new-hire compensation rose slightly in both sectors compared to last year.
- The number of job openings for salaried and hourly jobs in the manufacturing and services industries fell in October.

SUMMARY: The proposed FUTA taxable wage base increase would have a heavy impact on employer rates, reports the Unemployment Services Trust.

Santa Barbara, CA (PRWEB) November 10, 2011 — With most state unemployment funds now defunct after being depleted faster than they could be replenished during the recent recession, many states have found themselves with deficits that are growing as time passes. The United States unemployment tax system is in need of some serious restructuring, and it appears that the road out of the red is not a pretty one. Now, it’s ‘all eyes ahead’ through the thick of high unemployment, increased tax rates and special assessments. But, looking ahead to 2014, the proposed increase in the FUTA (Federal Unemployment Tax Act) taxable wage base from the current $7,000 to more than double at $15,000, could be devastating to employers if the proposal goes through, reports the Unemployment Services Trust (UST).

The proposal also includes a cut to the net FUTA tax rate from 0.80% to 0.38%, reducing the percentage by more than half. With the FUTA tax currently set at $56 per employee per year (0.008 x $7,000 = $56), and the proposed tax to be set at $57 per employee per year (0.0038 x $15,000 = $57), at first glance the change may seem trivial. The federal level, though, is not where employers would feel the pinch.

The pinch is found in the fact that states will have to match or exceed the FUTA $15,000 wage base, or face substantially higher FUTA rates. Thirty-two states (as well as Washington D.C . and Puerto Rico) would need to increase their unemployment taxable wage bases. There are currently 20 states with taxable wage bases of $10,000 or lower. The last time that the UI wage base increased was in 1983, so the increase is long overdue. However, it is expected that employers in these states will likely pay fifty percent more state UI taxes beginning in 2014 if the proposal is enacted.

Employers in states like California, who currently have a taxable wage base of $7,000, and for example, have an unemployment tax rate of 4.0%, will see their cost per employee increase from $280 to $600 annually. An increase this large (114%) would be detrimental to many employers, but especially nonprofit organizations, which typically have a tough time raising funds to cover operational expenses to begin with.

For 501(c)(3) organizations, federal law allows organizations to opt out of the state unemployment tax system and instead reimburse the state only for their own workers’ unemployment claims, dollar-for-dollar. When paying into the unemployment tax system, companies across the U.S. pay an average $2.00 for every $1.00 paid out in benefits, and these dollar amounts will likely grow where taxable wage bases will be increasing.

It should be noted, however, that nonprofits may find opting out of the state unemployment tax system to be burdensome on their HR department since they must monitor unemployment claims more closely, both to make sure they are not paying for unwarranted claims and also to ensure they have the funds on hand whenever a claim is filed. Some nonprofits have chosen to join an unemployment trust to help monitor claims, set aside funds in an account, and get support for their human resources department. For more information about joining an unemployment trust, visit http://www.ChooseUST.org.

Unemployment claims can negatively affect employer tax rates for several years and be especially burdensome to small businesses and nonprofits. Standard claims can increase an organization’s unemployment insurance (UI) costs by $4,000 – $7,000 over a three year timeframe. A recent article published by the New York Times quoted employment lawyer David Blaine, saying, “Hiring the right people is the first step in managing unemployment costs.” However, if any problems occur after the point of hire, they should be handled with a system of well-documented disciplinary actions: warnings, suspensions, and termination.

Upon terminating an employee after repeated verbal warnings for misconduct, Dr. Lisa Faast, owner of Faast Pharmacy lost an unemployment hearing for failing to properly document warnings to the employee. “Now, every discussion we have with an employee is written down, and we and the employee sign it. It can get kind of ridiculous. But since we’ve started that, we’ve won every case,” she stated in the NY Times article.

Here are some ways HR managers can help impact their unemployment costs through proper documentation and staying on top of claims:

- Workers who separate with the company voluntarily should be asked to give written notice of the separation in order to avoid a later unemployment claim.
- An employee fired for misconduct can be denied unemployment benefits; one fired for incompetence can collect. So make sure written warnings show that an employee broke a rule they knew about, if they did.
- Small business owners should monitor their UI statements as government numbers show that in 2010, 11.2% of UI benefits were paid out erroneously.
- Hire a claims monitor (or join a trust as a nonprofit) to get help auditing these statements and contesting inappropriate claims. Or if you go it alone, make sure to bring all documentation to hearings and be prepared.

SUMMARY: New data shows billions of dollars in unemployment benefits were paid in error over the last three years, and now businesses are being required to help pay down their state’s unemployment debt through increased taxes. As a result, the Unemployment Services Trust reports a 22% increase in nonprofits evaluating whether they should leave their state unemployment system before the quickly approaching annual deadline.

Santa Barbara, CA, October 14, 2011 — The Unemployment Services Trust (UST) reports that more nonprofits are exercising their federal right to opt out of the state unemployment tax system just as the DOL releases new data indicating that states overpaid unemployment benefits by nearly $19 billion from June 2008 to June 2011. These overpayments represent an error of more than 10% of the $180 billion paid out in jobless benefits. It’s an unfortunate statistic since employers pay taxes to fund these benefits, and now the same employers are facing special assessment fees and higher taxes to help pay down loans their states took when their funds went into a deficit. This new outlook, along with a November 30 deadline, has many nonprofit employers suddenly looking at their alternatives.

In the long run, the onus lies on both states and businesses to make efforts to reduce these overpayments, explains UST. Most erroneous payments made by states are due to: recipients continuing to collect benefits after they find work, recipients failing to register with state workforce organizations, and employers failing to submit information about employee separation in a timely manner.

However for now, employers will have to pay up. For example, Arkansas owes nearly $360 million in federal loans. Over the past three years, the state has overpaid unemployment benefits by an estimated $161 million, which is 45% of the amount borrowed from the Fed since March 2009. But, these funds are long gone and the debt states are experiencing after taking out loans will ultimately be passed along to employers. Many states have already called for special assessments to begin paying down the interest on the loans, the first payment of which was due September 30. New Jersey, for example, has borrowed $1.05 billion and is asking employers to pay an average of $23 per employee to help settle the state’s debt, which may not sound like much, but for smaller companies and nonprofit organizations who typically work on limited budgets, these costs can add up quickly.

In the nonprofit world, employers with 501(c)(3) status face quite a different scenario, if they choose. They have the alternative of opting out of the unemployment tax system and reimbursing the state dollar-for-dollar when an unemployment claim is filed against the organization. They typically avoid the state tax increases and surcharges, and simply reimburse the state directly for their actual benefit costs. In most states, this option can only be exercised once annually, usually by November 30.

UST, a grantor trust founded by a group of nonprofits to help other nonprofits opt out of their state unemployment tax system, says that being a direct reimbursing employer can help save on operating costs. In addition, becoming a reimbursing employer can also help reduce state unemployment overpayments since employers are more likely to watch their claims closely to ensure they aren’t reimbursing the state for improper claims charges. While examining claims can be more work for HR managers, UST says that there are organizations who can help monitor claims on a nonprofit’s behalf. For example, through the assistance of their own unemployment claims monitoring services, UST’s 2,000 members saved about $38.5 million in 2010, $1.9 million of which were state errors found in audits.

Says Donna Groh, Executive Director of UST: “Already this year we’ve received nearly 250 requests to opt out of the state and join our Trust, which is a 22% increase from this time last year, and they’re continuing to flow in steadily as the deadline to opt out gets closer. It’s not for everyone, but we’re glad to see more nonprofits being proactive about reducing their costs and monitoring their unemployment claims after getting hit with the news about these overpayments and rising state taxes.”