Nuances of Nonprofit Compensation: 2017 Compensation Best Practices


In a prior life, I did compensation and HR for a nonprofit. Every year, the age-old question would come up when it came time to benchmark our fundraising and programmatic jobs. The fundraisers, especially the Major Gifts Officers, had some pretty hefty goals to bring in cash. As a grantmaking foundation, if we didn’t have cash, not only could we not pay our operating and payroll expenses, we couldn’t do our core work. Our programmatic staff were at the heart of the organization. They worked directly with our grantees, sometimes on site, making sure they were funding the best groups.

The question, of course, was whether or not to pay them competitively to market, or use an internal bar for paying them and focus on paying equitably across the organization. This isn’t a new question, and isn’t unique to nonprofits. Anyone who has worked in a sales organization knows that you don’t compensate sales the way you do the rest of the organization, or medical staff the same as office staff, or faculty the same as staff. The difference is that in a nonprofit, there’s sometimes a temptation or even an imperative towards fairness in a values-driven environment.

42% of #nonprofits pay more for competitive jobs. Are you paying your top people right? Click To Tweet

We have gathered compensation best practices from the more than 400 respondents to the PayScale Compensation Best Practices Report who are in the nonprofit industry.

Nonprofits are less likely to say they have competitive jobs than other organizations; 87 percent of nonprofits say less than half their jobs are competitive (vs. 77 percent of all). That said, for their competitive roles, nonprofits are willing to compensate more (42 percent of nonprofits vs. 51 percent of all). When they do, they tend to target a higher market percentile (48 percent) or offer a market premium in base pay (39 percent).

Wages in the nonprofit industry outpaced the national average during the recession. Since then, however, nonprofit wages have fallen behind national wages.

Nonprofit Index PayScale

Back to our nonprofit dilemma: what’s the right thing to do? Your choice will depend on your organization and how well you can communicate the rationale behind your pay strategy. You can pay both groups the same, depending on their level of responsibility and contribution to the organization. If you decide to do so, you’ll have to decide if you intend to overpay programmatic jobs or underpay fundraising or development jobs. Hint: if you’re in a more competitive market, you’ll have to go with overpayment. Or, you can decide to use a market approach, which will result in paying fundraisers at a higher rate than program staff. Again the right answer differs from nonprofit to nonprofit.

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PayScale’s Nonprofit Industry Factsheet provides some insights about how nonprofit organizations approach compensation. A couple of highlights include:

  • Nonprofit organizations are twice as likely as other organizations to base increases on cost of living. Other reasons include performance, market value, and retention.
  • Compliance, both minimum wage and FLSA, played a larger role in compensation strategies for nonprofits in 2016 than for other organizations.
  • Nonprofits are more focused on perks and less on cash than other organizations; they are also much less likely to utilize variable pay

We have compiled lots of compensation best practices carried out by your nonprofit peers and we hope you’ll find them useful. Check it out.

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