Nonprofits should have an unemployment strategy

July 1, 2014

Nonprofits should have an unemployment strategy

Most nonprofits are focused on the future, putting their efforts into making their missions successful and helping those in need. The economy has stabilized and jobs are slowly coming back, even at nonprofit organizations where operating income isn't always the first priority.

A recent report from Indiana University shows how drastically employment rates in the nonprofit sector fell in Indiana during the Great Recession. Overall, more than 1,000 staff members at charitable groups across the Hoosier State lost their jobs due to the economic downturn that started in 2007. These numbers are similar, if not worse, than those of most other states, according to the report. The good news is that since 2011, both jobs and incoming funds have increased for nonprofits.

Keep required spending low to stay agile
While the economy is currently improved, nonprofits know that the market is volatile and lean times may soon arrive again. To keep operating with as few disruptions as possible, 501(c)(3) organizations should consider any and all ways to save money without having to sacrifice efficiency or quality. One area where significant savings can be found is to move from contributing to State Unemployment Insurance (SUI) pools to becoming a reimbursing employer. Instead of having to pay into large-scale state accounts, nonprofits can be responsible for only the unemployment claims of their own former employees. This cost cut can aid organizations that have high SUI obligations, as well as those worried contribution rates will rise as a result of expiring federal loans to states and corresponding increase in state unemployment tax rates.

However, this path requires that nonprofits find a way to manage risk. When organizations become reimbursing employers, a spike in unemployment can create a significant financial strain. Nonprofits can counteract this by participating in an unemployment savings program. This setup allows nonprofits to save money on possible unemployment claims without having to simply surrender those funds. An unemployment savings program allows organizations to carry any contributions as an asset and even bears interest. Payments can also be normalized and spread out over the course of a year, instead of the common payments made to SUI funds during the first half of each calendar year.

For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Group at FNCUI@firstnonprofit.com or visit www.firstnonprofitcompanies.com.

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Testimonials

NYCON members who use First Nonprofit’s programs enjoy enduring savings and improved efficiency. Our association knows that success, because from the beginning, we achieved the same great benefits. Great savings, seamless technology, and responsive service. NYCON highly recommends First Nonprofit’s remarkable unemployment solutions.

New York Council of Nonprofits, Albany, NY

We were introduced to First Nonprofit through another housing authority. In our analysis and comparison to what we were paying the State, our first year savings was $5,800 plus. We have been with them since the end of 2008 and I am glad we have been. I consider them an arm of our HR department.

Kankakee County Housing Authority, Kankakee, IL

Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.

Illinois Network of Charter Schools

Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.

Hugh Parry, Retired President of Prevent Blindness America