In this guide, we’ll explore some of nonprofit professionals' most common questions about compensation packages. Whether you’re about to start a hiring push to find a new major gifts officer or simply want to improve your current compensation approach, knowing the basics of compensation will make a difference.
Take your efforts to improve your strategy further by partnering with a nonprofit HR consultant. These experts can objectively evaluate your current approach and create tailored recommendations for long-lasting improvements.
Let’s begin.
What are the benefits of competitive compensation packages?
With the right compensation packages, your employees and organization will thrive. Competitive compensation can help your nonprofit better achieve its goals by cultivating a more positive and productive work environment.
Specifically, well-designed compensation packages can help you:
- Hire top talent. Highly qualified individuals know their value, and they likely have a good understanding of the standard industry rates for their role. An attractive compensation package that accounts for industry standards can bring these prospective employees to your nonprofit.
- Improve your nonprofit’s reputation. Building a solid brand for your nonprofit, both as an employer and a mission-driven organization in your community, starts with offering great compensation and benefits.
- Communicate your values. An excellent compensation package communicates how much your nonprofit values its employees and the work they do. This shows that your nonprofit prioritizes taking care of its employees.
- Boost retention. Competitive compensation drives employee retention because employees feel valued for what they bring to the table. Employees who are satisfied with their compensation are more likely to have high performance and productivity levels.
- Positively impact your employees’ lives in several different ways. The best compensation packages go beyond offering competitive salaries or bonuses and also provide great benefits, from healthcare plans and retirement packages to perks. Think holistically about your compensation packages to offer your employees the most value for their work.
Your employees’ satisfaction levels have a ripple effect on the rest of your organization’s operations. Prioritize making your employees feel adequately compensated for their work to maximize your nonprofit’s success.
What are some employee compensation best practices?
1. Hire a compensation consultant
Developing an employee compensation strategy is difficult for many nonprofits to tackle on their own, especially when working with lean budgets. Though it represents a large investment up front, partnering with trained professionals can be a wise move to help ensure employees are adequately compensated.
According to Astron Solutions, when working with a compensation consultant, your nonprofit gains access to expert knowledge in services like:
- Evaluation of current compensation strategies
- Development of new strategies and policies
- Job evaluation plans
- External market analyses
- Creation of incentive programs
It’s a compensation consultant’s job to analyze your existing compensation plan and find ways to improve or add value to it. Creating the most valuable compensation plan possible directly improves employee retention by giving your team incentives to continue working with you. After all, hiring new employees to replace those who move on is much more expensive than maintaining high satisfaction and retention levels with your current employees.
When your employees feel satisfied in their roles, their relationships not only with people inside but also outside of your organization are better. In other words, having happy employees translates to happy supporters, members, volunteers, and beneficiaries.
2. Compare your nonprofit’s offerings to similar organizations
Prospective employees are familiar with what other nonprofits offer in their compensation packages. To compete with those offerings and attract job candidates, you’ll need to research industry standards to see how your compensation package compares.
To get started, employ a few of these strategies:
- Consider your organization’s budget. It’s no secret that nonprofits often operate with fewer resources than for-profit organizations. Ensure that you’re well aware of the budget you have to work with for your compensation packages. Note that even though you have limited funds to work with, you can still offer competitive compensation packages by taking a total rewards approach (more on this in the next section).
- Look for similarities. Aim to find information about compensation for nonprofits with a similar cause, size, location, and job description. For example, let's say you’re researching compensation packages for a human resources role. Look into positions at nonprofits with similar headcounts, locations, and role expectations.
- Reference annual salary reports. Government entities like the Bureau of Labor Statistics provide annual salary reports for nonprofits — these reports are a great starting point for getting an idea of what your compensation package should look like. Additionally, consider other figures and studies like what constitutes a livable wage in your area, including the most recent Putting People First Nonprofit Wages & Benefits Survey conducted by 501 Commons and King County.
- Take note of current compensation trends. Explore what salary levels are being offered for specific positions and look into the benefits employees are most excited about. You can do this by researching what thought leaders have to say about what is most popular and by looking at other organizations’ job postings. Prospective employees will likely expect these trends to be reflected in their compensation packages, too.
- Identify your strengths and weaknesses. Once you take stock of your competition, look at your own compensation plan with a critical eye. Begin drafting solutions to any weak areas, and plan to highlight strong or unique offerings in your recruitment efforts.
Try to stay ahead of the curve to separate yourself from the competition. For example, look into benefit options other organizations don’t commonly offer, such as a subscription for a meal kit service or an employee wellness program.
3. Take a total rewards approach
Due to budget restraints, nonprofits often can’t be as competitive as for-profit businesses when it comes to salary. However, your organization can offer a total rewards approach complete with both financial and non-financial benefits. With this approach, salary should only be one piece of your compensation package, with additional benefits giving employees opportunities to achieve their life and career goals.
For example, your employees may need to learn how to use specific digital tools to be successful in their roles. Giving your employees paid training helps them learn how to use a tool that will help them perform their job at a higher level, leading to promotions and other rewards in the future.
In addition to paid on-the-job training, you can offer other financial and non-financial benefits such as:
- Direct compensation: Direct compensation is the payment your employees receive for performing their jobs. This part of the compensation package is where things like salary and bonuses fall.
- Benefits: Benefits are a form of compensation that adds value to your compensation package outside of traditional direct compensation. Common benefits include health insurance policies and retirement accounts.
- Flexibility: Giving your employees the ability to choose how, when, and where they want to work is a simple but highly sought-after benefit. For example, giving your employees the option to work from home and choose when they start and end their day gives them more control over their work-life balance.
- Performance recognition: Recognizing a job well done makes employees feel seen and valued in the workplace. A common way to implement this benefit into nonprofit compensation plans is to pay out bonuses or give prizes for reaching performance goals.
- Career development: Give your employees the chance to develop their skills by paying for continuing education opportunities like conferences. These events allow employees to sharpen their skills, build their professional networks, and learn about new trends in the nonprofit sector.
While it can be tricky for nonprofits to find extra room in their budgets to expand the salaries they offer, competitive compensation packages can be so much more than just a salary. As you work to recruit (and retain!) employees, promote the other benefits you offer and the money employees will save on things like insurance plans, just as you would salary.
About the Author: Jennifer C. Loftus, MBA, SPHR, PHRca, GPHR, SHRM-SCP, CCP, CBP, GRP
Jennifer C. Loftus is a Founding Partner of and National Director for Astron Solutions, a compensation consulting firm. Jennifer has 23 years of experience garnered at organizations including the Hay Group, Parsons Brinckerhoff, Eagle Electric Manufacturing Company, and Harcourt General.
Jennifer has held volunteer leadership roles with SHRM, New York City SHRM, and WorldatWork. She serves as a subject matter expert to the SHRM Learning System and as a SHRM instructor. Jennifer is a sought-after speaker for local & national conferences and media outlets.
Jennifer has an MBA in Human Resource Management with highest honors from Pace University and a BS in Accounting summa cum laude from Rutgers University. She holds Adjunct Professor roles with Pace University, Long Island University, and LIM College. In 2014 she received the Gotham Comedy Foundation's Lifetime Ambassador of Laughter Award.