Approaching the Tricky Topic of Nonprofit Compensation

Lyn Freundlich

We’re pleased to share this guest post from colleague organization Third Sector New England, in which they share findings and recommendations from their recent, regional compensation study, Valuing Our Nonprofit Workforce 2014: A Compensation and Benefits Survey of and for Nonprofits in Massachusetts, Rhode Island and Adjoining Communities

Our nonprofit workforce needs a raise. At Third Sector New England, we have just completed a regional compensation study,Valuing Our Nonprofit Workforce – a snapshot of the salaries and benefits of 250 nonprofits from Massachusetts and our surrounding communities. From our data, one of the alarming findings is that 43% of the employees represented in this survey are earning less than $28,000 per year. Given the costs of housing, student loan payments, child care, and other necessary expenses, this basic salary falls short of a living wage for individual workers and especially for those with families.

This is very concerning to those of us in the social justice sector who are working toward a more equitable society. A nonprofit career, even a career working in the smallest of organizations, should be a viable option for anyone who wants to travel that path. Better wages and benefits contribute greatly to developing a professional, high-performing staff for nonprofits and ultimately for the stakeholders invested in their success. One should be able to dedicate one’s life to doing good, without having to do without.

But compensation remains a tricky topic in the nonprofit sector. It is particularly difficult for the tens of thousands of small to medium sized nonprofits who are often working in our communities and serving those in our society most in need. We have all heard stories in the media about unscrupulous nonprofit leaders—those who pay themselves exorbitant salaries; often at the expense of their organizational missions and the people they serve. It is important that we differentiate between the overpaid executive and the majority of the nonprofit workforce and the institution with a multi-billion dollar endowment compared to those struggling for their next round of funding.

The reality for most of us working in small- to medium-sized nonprofits can be very different from these larger nonprofits. Typically we employ and work alongside dedicated colleagues who take the stewardship of our limited resources very seriously. Many, if not most, put in long hours for little pay. We come to this work because we want to make a difference, not make a fortune. We also need to remember that in order to eradicate poverty and other societal ills, we don’t need to take a vow of poverty ourselves.

Approaching the Topic of Compensation

Our funders and donors need to remember that livable wages don’t constitute excess. That fair compensation is linked to the health and viability of our organizations and the nonprofit sector and that leads to better outcomes and mission impact. But how much is too much? What level of benefits is appropriate? How do we advocate for a raise? Here are some approaches we suggest:

Take time to document your compensation practices: Using tools like our salary database or cost of living calculators, nonprofits can look at how similar groups across their region and in various nonprofit fields compensate employees. Armed with baseline data, administrators can be more clear, articulate and transparent about how compensation decisions are made. Documented compensation practices that are grounded in real world data help board members and funders understand investments in salaries and overhead.

Comparing pay across similar organizations is a complex but useful practice. Remember that different organizations use different titles for the same or similar jobs. Look closely at the job descriptions to find the best match. Some responsibilities within a particular position may overlap with more than one other title. This exercise can be a little challenging, but comparisons remain informative.

Reflect your organizational values in compensation decisions: There is no single right way to rationalize your compensation practices. Being able to clearly articulate organizational values related to compensation and benefits, and the ways in which they are reflected by practice, assure staff and stakeholders that compensation decisions are systematic and fair. And when employees are being treated fairly, even if they wish that they earned more money or received more paid time off, morale, productivity, and impact are likely to be high.

For instance, groups working on access to health care might pay for 100 percent of their employees’ health insurance coverage. Organizations addressing the disparity of wealth may intentionally pay everyone a similar wage. An organization may strive to pay the market average salary for each position. Another approach an organization may consider would be to pay new employees a salary that is lower than the average market pay for a particular job and more tenured staff a rate higher than average market wages.

Reflecting your mission and values in compensation practice can make a powerful statement to funders, donors, and stakeholder about your organization and its commitment to fair wages for employees.

Advocate for Your Employees:Using the available data, documenting your practices, and aligning your compensation with your organizational values can be powerful tools to advocate for more equitable and fair compensation for all employees. These tools can guide conversations with your board, funders, and stakeholders. Even if you don’t currently have additional resources or funding in place, these tools can act as a guide in developing a strategy to reach your compensation goals. 

Nonprofits are a powerful social and economic driver in our society. The nonprofit sector is the third-largest workforce in the United States employing 10 percent of our total workforce. Here in Massachusetts it is 16.7 percent of our state’s workforce. And with the national debate raging about increasing the minimum wage to a livable level, it’s time for nonprofits to help move the conversation forward.

Consider compensation a call to action—a call for every one of our organizations to reflect, innovate, and take risks. The results of our survey and the questions it raises can spur us to use this data to look deeply, not just at our compensation practices but also at how we hire and promote staff. We have the opportunity to reflect and act on whom we choose to train and develop professionally. Considering what we are learning from data like this, we can think about the ways we reward and recognize success

It is also a call to our funders to do the same: to consider how funding practices, overhead limits, and preconceived notions about compensation contribute to the perpetuation of the very issues they seek to address. We need funders to invest not only in our direct programmatic work but also in our infrastructure. This visionary investment will allow our organizations, our staff, and the communities we serve to thrive.

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