Compensation and Benefits Best Practices

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Nonprofit boards of directors have an obligation to balance internal equity with market-based and liveable compensation for all employees.

This can be achieved in several ways. One way is to gather data on comparable organizations from publications such as MCN’s Minnesota Nonprofits Salary and Benefits Survey or to contact a firm to conduct market research on behalf of your organization. Nonprofits can also identify peer organizations and contact them on an individual basis. In this case, most organizations will consider sharing information under the condition it is kept confidential. Another strategy is to view the organization’s IRS Form 990 reported salaries for key positions (due to recent reporting changes, only the executive director position or positions over the $100,000 compensation reporting threshold are reported).

Once data is collected using the above methods, it is a best practice to develop salary ranges for all regular staff positions. While nonprofit boards generally do not approve compensation for nonprofit employees other than the executive director, some boards will choose to review the process by which organizations set their compensation levels and will approve the ranges.

Organizations may also decide to adopt a compensation philosophy to share with staff that includes the process for gathering data and how ranges are set. Organizations may wish to have their boards review and approve such a policy.

Nonprofits should also provide personnel with adequate benefits and the opportunity to contribute to retirement plans. This can be challenging for organizations with small budgets or in tough economic times, but organizations should consider contacting a broker to price out the actual cost of a plan. Minnesota state law only requires that two individuals participate in a plan, but please note that if an employer decides to contribute to the plan, that they must pay at least 50 percent of the premium.