Nonprofit Pay Improving with the Economy

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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 that we observe in the for-profit sector of the economy.

This shows that salary adjustments in nonprofit organizations are starting to recover in the face of improving economic conditions.

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 that we observe in the for-profit sector of the economy.

“Nonprofits felt the pinch that most industry sectors experienced over the last few years” according to Paul Gavejian, Managing Director of TCS. “This was manifesting itself in shrinking endowments, fewer contributions, and a diminished capacity for developing new and creative channels for fund-raising.” “This year’s data suggest that there is a recovery in process, albeit modest, that will improve the employment picture for nonprofits.”

The 2010/2011 Not-for-Profit Compensation Survey, conducted by TCS, 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.

“Some nonprofits are using for-profit organizations when they create a peer group for use in setting pay for executives” adds Gavejian. This practice was frowned upon five to ten years ago. “Now, it’s part of the recognition that nonprofits must compete with all companies in the economy and not just their own counterparts in the nonprofit sector.”

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. “These organizations are rewarding executives for achieving strategic and tactical performance objectives” according to Gavejian, “It’s a dramatic shift for many of these organizations and makes them more competitive with the for-profits.”

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.

The 2010/2011 Not-For-Profit Compensation Survey is the eighth edition of this survey and TCS is proud that it has become a valuable resource for nonprofit organizations as well as other consulting firms. Copies of the survey are available from TCS (http://www.total-comp.com). If you have questions regarding this 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.

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