Most people assume that the term “nonprofit” means that these organizations or their employees cannot make money. But that’s not true!
Nonprofit organizations do offer salaries to their employees - from the higher-ups like directors and managers to lower-level employees like assistants, coordinators, and more.
Although nonprofits pay salaries, certain regulations influence their compensation. In this article, we will break down what a reasonable salary is for nonprofits. We will also discuss the factors influencing their pay and nonprofit salaries according to different roles.
What does our guide on nonprofit salaries include?
What is reasonable nonprofit compensation?
What factors influence nonprofit salary ranges?
Average salary of different nonprofit job titles in the USA
Final thoughts on nonprofit salaries
FAQs on nonprofit compensation
What is reasonable nonprofit compensation?
The IRS determines a nonprofit's reasonable compensation as the "value that would ordinarily be paid for services by like enterprises under similar circumstances."
Nonprofits must follow all federal and state wage laws that require employers to pay a minimum wage. The current federal minimum wage rate is $7.25 an hour, but most states have their own minimum wage rates. You must pay whichever is higher.
Beyond the minimum wage rate, each state's hourly rates and fixed salaries differ widely.
Nonprofits offer employees perks and benefits in addition to reasonable pay. These include competitive healthcare and retirement plans, flexible work schedules, tuition reimbursement, and/or student loan forgiveness.
What factors influence nonprofit salary ranges?
The salaries of employees in the nonprofit sector are based on several factors. These go beyond IRS compensation rules and state and federal wage laws.
Understanding these factors is crucial for nonprofit leaders to ensure fair and competitive compensation.
By doing so, tax-exempt organizations will be able to easily hire and retain staff for the long haul, minimizing recruitment and employee training expenses down the road.
Location
The geographic location of a nonprofit is an important factor influencing salaries. For a city like New York or Boston, an organization will have to pay a higher amount compared to those settled in the suburbs.
This difference is because of cost-of-living variation. Cities are more expensive to live in, and any nonprofit that does not pay a living wage will face difficulty in retaining top talent.
Organization size
Larger organizations are financially more stable with a significant pool of funds. This allows them to offer attractive compensation packages.
Smaller organizations have more limited resources and funding, providing low compensation. They can provide other benefits like flexible working hours and opportunities for professional growth.
Type of Nonprofit
Each organization has its own financial resources, funding structures, and organizational needs influencing their compensation levels.
For instance, hospitals have diverse funding sources like government funding, individual donations, grants, and more. With significant income, nonprofits in the healthcare field can pay employees higher compensation.
On the other hand, a local animal shelter may have a smaller budget and limited funding resources, affecting the overall compensation.
Responsibilities
Nonprofit organizations typically structure their compensation based on the scope and impact of each role.
For instance, an executive director, who oversees staff and events, will receive higher compensation compared to roles like a volunteer head or marketing professional.
Qualifications
Some nonprofit positions demand more experience and higher education. These positions will naturally have better pay than those that are entry-level or require a high school diploma.
For instance, executive salaries in nonprofits are higher compared to those in the human resources field.
Nonprofits should aim to offer fairly good salaries at all levels, particularly to employees with good qualifications and strong experience. This will attract well-qualified candidates, particularly for challenging roles.
Fixed and variable compensations
Not all organizations pay their employees in the same way. Some use fixed salaries, while others rely on variable or hourly pay.
Fixed salaries mean that nonprofit employees will receive a set amount of money each pay period, irrespective of performance or other factors. Salaried employees in an organization are typically those in more executive or leadership positions.
Variable compensation means that an employee's pay is based on different factors. These cover individual performance, achievement of specific goals, and organizations' financial situation. Many lower-level and part-time positions at nonprofits are paid by the hour.
Average salary of different nonprofit job titles in the USA
Final thoughts on nonprofit salaries
To maintain tax-exempt status and compliance with state and federal wage laws, nonprofits have to ensure that their salaries are not excessive but reasonable.
To set fair and competitive salaries, research the nonprofit sector thoroughly. Assess what other nonprofits in your area are offering and factor that into the decision-making process. Turn to the labor market to benchmark a reasonable value.
Remember, with a qualified and motivated team, there is no limit to what you can achieve!
