Nonprofit Pay Increases Reflect Economic Conditions, Shows New Study by Total Compensation Solutions

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Reflecting economic conditions in the marketplace, the average salary adjustment for staff positions in nonprofit organizations decreased marginally from 4.0% to 3.8% between 2007 and 2008.

Our clients in the nonprofit sector were on track for record contributions, their revenue generating divisions were making money; and their employees were providing excellent response to their governing communities…then the financial crisis hit the economy and everything changed.

Reflecting economic conditions in the marketplace, the average salary adjustment for staff positions in nonprofit organizations decreased marginally from 4.0% to 3.8% between 2007 and 2008. However, this may not account for the significant downturn in the U.S. economy from September through December of 2008. According to a new study released by Total Compensation Solutions (TCS), financial conditions in the economy are reflected in the level of charitable contributions received by nonprofit charitable organizations and this, in turn, may impact the salary budgets for those organizations. This suggests that nonprofits may need to take decisive action in either cutting back staff or reducing the salary budgets for the upcoming year.

The 2008/2009 Not-for-Profit Compensation Survey, conducted by TCS, compiles data on 73 unique positions found in over 530 nonprofit organizations. In previous surveys, we observed that nonprofits were changing the way they pay their employees. Specifically, we observed an increase in the number of organizations that were using formal bonus/incentive compensation plans for their staff. For 2008, we presume that these same organizations will either pay significantly lower bonuses or suspend bonus payments altogether. We believe that this is a reaction to declining economic conditions throughout the economy.    

This year's study of compensation among nonprofits reports average pay levels for executives in mission critical and support departments among these organizations. An overall summary of the average total compensation for executive positions is attached to this press release

The study observes that salary adjustments for 2008, turnover, bonus/incentive amounts were all tracking the practices of for profit companies for most of the year. However, the study identifies compensation practices for the first part of 2008 and does not account for moderate changes in revenue stream, charitable contributions, and prospective planning for 2009 which may be changing even as this document goes to press. "If you could break out the first six months of 2008, nonprofits had a pretty good year," says Paul Gavejian, Managing Director of TCS. "Our clients in the nonprofit sector were on track for record contributions, their revenue generating divisions were making money; and their employees were providing excellent response to their governing communities…then the financial crisis hit the economy and everything changed."    

"Preliminary salary budget reports suggest that both for profit and nonprofit organizations are considering either a freeze on salary adjustments or minimal increases." Historical trends indicate a high degree of correlation between salary budgets and the consumer price index (CPI). "With a significant increase in the unemployed labor force and a lower CPI, many employers are simply being cautious about increasing pay," according to Gavejian.

The 2008/2009 Not-For-Profit Compensation Survey is the sixth edition of the survey which TCS has published since 2003. It is a valuable resource designed specifically for nonprofit organizations. Copies of this report are now available. If you have questions regarding this report or if you would like to order a copy of the report, please call TCS offices at (914) 730-7300 or email questions to: pgavejian at total-comp dot com or tbailey at total-comp dot com.

Total Compensation Solutions is a human resources consulting firm dedicated to assisting clients in achieving their strategic compensation objectives. The firm uses market data to identify best practices in a variety of topical areas including: board compensation; executive, middle management and staff compensation; performance management; organization structure; health and welfare; and retirement benefits. With client interaction, TCS gathers and reports information on compensation, personnel practices and benefits and applies the most effective, market-driven solution to each organization's unique set of circumstances. For more information about TCS, visit http://www.total-comp.com or contact us at: 914-730-7300.

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Thomas Bailey
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