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Nonprofit pay seen recovering

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Paul Gavejian

Paul Gavejian

Salaries at nonprofits are growing as economic conditions improve, with nonprofits posting the same modest improvements as for-profit companies, a new study says.

Salary increases at nonprofits totaled 3.1 percent of base salaries in 2010 and are projected to total 3.5 percent this year, says the 2010/2011 Not-for-Profit Compensation Survey conducted by Total Compensation Solutions, or TCS, a human-resources consulting firm in Armonk, N.Y.

Nonprofits now are offering compensation packages that are roughly equivalent to pay in for-profit companies in order to compete effectively for executive and staff positions in a highly competitive marketplace, the study says.

It is based on data on 74 unique positions at 760 unique nonprofits throughout the U.S., including information on nearly 4,800 individual employees.

Nonprofits continue to offer competitive benefits to employees, including the cost-sharing approach they have used in recent years on health benefits and retirement-benefit plans, which tend to be slightly more generous than benefit plans and retirement plans in the for-profit sector, the study says.

“For a long time, it was perceived that nonprofits offered dramatically higher benefits to offset their lower pay structure,” Paul Gavejian, managing director of TCS, says in a statement. “Now, nonprofits need to pay competitive salaries and even bonuses in order to attract and retain talented managerial and professional employees.”

As a result, he says, some nonprofits offer total compensation that is competitive with for-profit pay.

And some nonprofits are using for-profit companies when they create a “peer group” for use in setting pay for executive, he says.

Roughly 12 percent of nonprofits have adopted formal bonus plans for their most senior executives, with the plans using a variety of performance measures, and the bonuses often linked with operating budget variances and operational effectiveness, TCS says.

The says over 20 percent of nonprofits offer a bonus or incentive award to their CEO or executive director, up from fewer than 10 percent in 2005.

“These organizations are rewarding executives for achieving strategic and tactical performance objectives,” Gavejian says. “It’s a dramatic shift for many of these organizations and makes them more competitive with for-profits.”

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