U.S. Nonprofit Pay Improving with the Economy

Some nonprofits offer total compensation that is competitive with for-profit pay

The overall salary adjustment for staff positions in nonprofit organizations is starting to recover. In a study of 760 unique organizations, salary budgets for 2010 were 3.1% and they are increasing to 3.5% for 2011 according to a new study released by Total Compensation Solutions (TCS) a human resources consulting firm. This shows that salary adjustments in nonprofit organizations are starting to recover in the face of improving economic conditions. It also shows that nonprofits are experiencing the same modest improvements as in the for-profit sector of the economy.

The 2010/2011 Not-for-Profit Compensation Survey compiles data on 74 unique positions found in 760 unique nonprofit organizations located throughout the U.S. The database includes information on 4,797 individual employees in the nonprofit sector. This survey reports competitive pay levels for executives and professional staff in mission critical and support departments among organizations with operating budgets ranging from Up to $5 Million to Over $50 Million.

TCS also observes that nonprofit organizations continue to offer competitive benefits to their employees. In particular, nonprofits are maintaining the cost-sharing approach that they have used for the past few years on health benefits and retirement benefit plans. These plans tend to be slightly more generous than the benefits plans and retirement plans in the for-profit sector.

“For a long time, it was perceived that nonprofits offered dramatically higher benefits to offset their lower pay structure” according to Gavejian. “Now, nonprofits need to pay competitive salaries and even bonuses in order to attract and retain talented managerial and professional employees.” The result is that some nonprofits offer total compensation that is competitive with for-profit pay.

TCS observes that about 12%% of nonprofit organizations have adopted formal bonus plans for their most senior executives. These plans use a variety of performance measures. The bonuses are most often linked with operating budget variances and operational effectiveness. The 2010/2011 survey reports that over 20% of nonprofits offer a bonus/incentive award to their Chief Executive Officer/Executive Director. In 2005, less that 10% offered bonuses.

TCS’s survey concludes that nonprofit organizations offer compensation packages that are roughly equivalent to pay in for-profit companies in order to effectively compete for executive and staff positions in a highly competitive market place.