The Coronavirus Aid Relief, and Economic Security (CARES) Act. provided a much-needed safety net to our tax-exempt organizations with various funding and loan programs to help support payroll and other operational costs during a time when they were forced to shut down or scale back their services. For many tax-exempt service providers, this added support helped fund the need for additional workers or the additional pay required to retain and recruit these essential workers. As COVID-19 restrictions have lessened and tax-exempts are now better able to respond to pent up demand for services, they are experiencing a new challenge; they are not able to able to provide their mission services to full capacity because they simply do not have the workforce to do so.
The Wall Street Journal recently reported that there are 4.3 million less workers in the United States compared to pre-pandemic February 2020. Speculation that as COVID-19 cases drop, vaccination rates increase, children return to school, and unemployment benefits expire, there would bea resurgence of workers back into the workforce. Unfortunately, data is suggesting that the labor shortages may continue to deepen before they improve. The pandemic shifted behavior and attitude towards working as people learned to enjoy the flexibility of a work at home environment or appreciated the break in the day-to-day high stressors of their jobs. The pandemic seems to have driven many to early retirement as the population of retirees rose 3.6 million between February 2020 and June 2021, which represents double the expected growth for this period.
Nonprofits have been hit particularly hard as they are competing with other industries that provide more work from home options that often aren’t feasible for our mission-based organizations. The field is predominantly feeling the pains of burn-out, stress, and trauma within their workforce. Many workers are stating their work environment isn’t even deemed safe. These factors are just a few that are causing people to leave the health and human service field entirely. Moreover, tax-exempts are competing with for-profit organizations that can often pay more. Rising minimum wage standards are also causing significant budgetary stress as organizations need to raise lower-level wages, as well as provide compression adjustments to others. This is all during a time where government funded programs are threatening funding reductions versus increases to support increased costs.
Tax-exempt organizations can take some steps to mitigate the long-term impacts of this work force predicament by focusing on investments in technology, workforce retention and recruitment programs, and strategic planning.
Investments in technology can assist greatly in reducing the administrative burden on direct care personnel and can ultimately create efficiencies and improve quality outcomes. Additionally, some investments in technology can assist in expanding work from home options for certain administrative and fiscal personnel and functions. Some organizations have reported they have been able to effectively reduce their administrative footprint resulting in cost savings as well as improving their employee retention rate.
Not many tax-exempts have formal staff retention and recruitment programs, however, a program dedicated to workforce retention, using data to provide predictive analytics surrounding burnout, turnover, and employee satisfaction levels, can be highly effective in protecting the workforce. Furthermore, organizations need to “sell” their complete compensation offerings, which include organizational culture and work/life balance options. Retention tools should also include efforts to increase employee engagement and foster their commitment to the organization’s mission.
Strategic planning has never been more important as organizations are looking to understand what their long-term sustainability will be post-COVID-19 pandemic. CEOs and Boards are taking a hard look at current services provided under their mission and are evaluating which ones are financially viable. Compliance and regulatory demands on tax-exempt organizations are tremendous. The ever-changing compliance and regulatory landscape challenges business operations and increases workload. Sometimes the decision to stop providing certain services, while may be a smart financial decision, may have significant consequences for the communities served by the tax-exempt. More than ever, Organizations are considering partnerships, alliances, and affiliations to find ways to achieve some economies of scale and refocus their missions.
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This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.