Salaries and compensation at U.S. nonprofits are beginning to mirror the for-profit sector, with higher salaries and decreasing benefits, a new study says.
An annual study conducted by consulting firm Total Compensation Solutions shows a nearly 4 percent average salary increase between 2006 and 2007.
Examining compensation packages for 75 positions at nearly 450 U.S. nonprofits, the 2007/2008 Not-for-Profit Compensation Survey says salary adjustments are approaching for-profit standards.
The trend toward merit-pay systems, which link compensation to individual performance and best practices, may be a response to intensifying governmental regulation of tax-exempt organizations, the study says.
“Nonprofits need to pay higher salaries in order to effectively compete for executive and staff positions in a highly competitive market place,” Paul Gavejian, managing director of Total Compensation, says in a statement. “They also have to link pay to performance or they risk losing good people to the for-profit sector.”
The study also takes a detailed look at executive-level pay across a number of mission-critical and support departments.
The study analyzed a wide variety of nonprofits, with annual operating budgets ranging from less than $5 million to more than $50 million.
Average executive salaries across various executive positions ranged from $99,000 for top grant administrators to $211,000 for legal executives.
At the same time, many groups have recently instituted formal bonus plans for senior executives, usually linking them to strategic performance objectives such as operating budget variances and the effectiveness of development efforts, the survey says.
Such bonus systems often work to retain leadership tempted by big for-profit pay packages, says Gavejian.
The nonprofit sector is known for offering generous benefits to compensate for lower salaries, yet the survey results suggest this traditional counterbalance may be on the decline.
“We observe that there is some moderation of this generosity due in part to significant cost increases in health benefits,” Gavejian says. “If this trend continues, nonprofits may lose a competitive advantage that they’ve enjoyed over the for profit sector.”
Total Compensation Solutions is a research and consulting firm specializing in in employee compensation with offices in Armonk, N.Y., and Los Angeles.