Your state association of nonprofits may conduct salary surveys and offer state-specific compensation reports. Other sources include outside compensation consultants and Candid, which collects executive salary data from IRS 990 filings and makes the data available for a fee. The widely accepted metric is 15% or less of a nonprofit’s budget should be spent on fundraising costs.
How Much Do Nonprofit Employees Make?
A key component of financial sustainability is the commitment of board and staff to financial management that includes timely review of financial reports and advance planning. One way that board and staff plan for income and expenses in the future is by creating a budget. Approval of the annual budget is one of the fundamental building blocks of sound financial management. A nonprofit budget is a document that enables your team to plan for expenses and allocate resources.
Revenues and Support
Cost of living is the market value of goods, such as housing, food and fuel. Cost of labor is how expensive it is to hire people in an area—not how expensive it is to live in that area. Organizations should keep in mind that inflation is short-term while base pay increases are more permanent. Inflation has been low for the last decade with most salary budget increases trending above the inflation rate. Employers experienced a similar situation and set of choices in 2008 with the Great Recession. Restraint is recommended in how much an organization should add to their overall salary budget to prevent longer-term consequences of paying more than an organization’s desired market position.
How much of my expenses should be salaries and other administrative costs?
Experience has shown that nonprofits with optimal operations are the ones that offer higher salaries to attract a workforce with the requisite qualification and experience. On the other hand, many nonprofits struggle to give adequate compensation to their employees due to infrequent cash flow and tight operating expenses leading to high employee turnover. Nonprofits account for a large share of the United States workforce; it’s the third-largest employer of labor in the United States. Still, many nonprofits face a frustrating reality that undercuts their efforts to make payroll.
The reason nonprofit employees are paid less, according to researchers Christopher Ruhm and Carey Borkoski, is simply because nonprofit organizations are disproportionately concentrated in low-paying industries. Despite the predominance of women in nonprofit accounting services for nonprofit organizations executive positions around the country, male executives make significantly more than their female colleagues do. The gender gap is especially wide at agencies with budgets of more than $5 million.
Report
- When you aren’t willing to spend any money on fundraising, you can’t implement strategies that are likely to work for your organization and get the traction you need to get your fundraising off the ground.
- Last week Candid hit a milestone, launching our biggest, most robust nonprofit compensation report yet.
- We can recount many examples of the importance of having a comprehensive compensation philosophy and policy in place.
- Assuming the founder is the Executive Director or President of the nonprofit, the founder’s average an annual salary of $147,241.
- Schedule a free consultation with The Charity CFO today and let’s build a budget that empowers your mission.
- After all, you can’t figure out the right balance for your organization if you don’t know what to categorize as a fundraising expense.
With the understanding that cost of labor continues to be volatile, Nonprofit HR recommends that organizations review market ranges or compensation structures every one to two years to account for new trends in the labor market. Previous guidance given to clients and a good general rule of thumb was to review market ranges or compensation structures at least every three years. However, the pandemic, among other factors, has made markets more unpredictable. Organizations may be tempted to simply apply a percentage increase to their current salary structures.
- Candid’s team also added 21 new metropolitan statistical areas (MSAs) to the report this year to allow for greater geographic comparisons.
- Remember to base your budget on your nonprofit’s specific needs and history.
- And no, you can’t pay a development director or grant writer a percentage of the revenue they raise.
- A larger budget on salary increases alone is not strictly enough to address attraction and retention challenges.
In addition, when deciding on the budgetary allocation of your employees’ salaries, you should factor in the cost of your area, the cost of living, the type of services your nonprofit renders, and the size of your budget. One factor that can significantly impact the personnel expense ratio is the level of volunteer participation within that organization. In other words, organizations with a strong culture of volunteerism should see a much lower personnel expense ratio. For example, I know of a pregnancy help organization that operated exclusively through volunteers from its inception. Now, they eventually did reach a point where they needed to hire a director and an assistant, but it took them upwards of 40 years to reach that point. Of course, in this example, this organization would’ve had a much lower personnel expense ratio than many other nonprofits.
