Nonprofit Employee Compensation: To Pay or Not to Pay and What is Fair?
By Kathleen Ruddy, CEO of the St. Baldrick’s Foundation
All managers should be responsible stewards of their budgets, whether they work in a publicly-traded company, for the owner of a private business, or for a charity. While a business must satisfy investors’ and the market’s expectations, the “profit” after expenses in the charitable world is what is invested in the mission. However, charities are often held to a standard that threatens their sustainability.
“This mission is so important. Why are you spending money on staff?”
With more than 30 years in the nonprofit sector, this is a question I hear a lot. It’s easy to say, “everyone needs to eat,” but that’s doing the mission a disservice. I get it, we all want precious dollars to address the problems we choose to fight, and nobody wants to pay for overhead.
In my role as CEO of the St. Baldrick’s Foundation, the largest non-government funder of childhood cancer research grants, I have a rare vantage point — as both a donor and an employee — and argue that employees are an integral part of a sustainable organization and the achievement of the mission.
Simply put, we are the quality control.
At the St. Baldrick’s Foundation, we raise most of our funds for childhood cancer research through our signature head-shaving events which are run by volunteers, the real heroes of the St. Baldrick’s story. But these volunteers cannot do what they do without the support that comes from staff who recruit, train, coordinate, and manage them. Our small staff works with more than 50,000 volunteers and millions of donors annually. An organization of our size and scope which operates in 30 countries has many legal obligations that require professional expertise, judgment, and management. Each donor expects the Foundation to be responsibly run, to ensure dollars are not wasted, and that money is in fact used for the intended purpose — to fund the best childhood cancer research.
That’s impossible to achieve without qualified, year-round staff.
If you work for a nonprofit, you’ve likely been asked if you’re paid and why. We should all take this question very seriously — it’s an opportunity to present our achievements and ensure our supporters remain with us.
Best employment and compensation practices apply to any industry and charities cannot afford to leave those who serve the mission daily out of the equation. Nonprofits cannot compete financially with for-profit companies in attracting highly qualified professionals, and the cost of losing dedicated employees, who are willing to work for less than they would earn in the for-profit world, drains institutional knowledge and capacity.
Failing to protect human “assets” not only misuses donor dollars, but it also threatens the organization’s ability to realize the mission.
The St. Baldrick’s board of directors guided us to adopt and adhere to compensation practices that ensure we are not only being responsible with donor dollars but a good employer as well. Here are some important factors to consider:
1. Establish a compensation committee within your board of directors. Have them review and approve all salary grades. Make sure to place an experienced human resources executive on this committee. It’s also smart to ask board members to enlist their corporate attorneys to donate their time when legal questions arise.
2. Participate in salary studies to obtain free reports. This data can be used to inform your compensation ranges and practices.
3. Be fair. Research current non-profit “market” rates for salaries. Also, consider the skills and level of responsibility for the role, size and scope of the organization, economic conditions, and the local cost of living when setting compensation. Aim to be at the midpoint of the range.
4. Include benefits. Medical insurance, paid time off, holidays, and sick time add up. Every year, provide each employee a statement of the value of their total compensation, including benefits so they recognize all the ways you compensate them.
5. Manage your expense ratios. Our administrative costs are 4% per year. Aim for consistency to promote stability in the organization.
6. Be transparent. Ensure your updated financials are easily found on your website and respond to all legitimate questions that come your way.
If you are a nonprofit leader or serve on a board of one, I hope this article has been helpful in giving you the steps needed to adopt fair and humane compensation practices so your organization will endure. If you found value in this, please like and share this with your community.
Connect with Kathleen on LinkedIn. With more than 30 years of nonprofit fundraising, marketing, and public relations experience, Kathleen Ruddy joined the childhood cancer community in 2001 and has led St. Baldrick’s growth from the ground up. As the largest non-government funder of childhood cancer research grants, St. Baldrick’s funds every stage of research to find cures and better treatments for more than 100 types of childhood cancers. Kids are alive today because of St. Baldrick’s funded research. Join us as we conquer kids’ cancers.
