If you have ever worked at a nonprofit, you have heard the following questions. “Does that work even pay?” “Aren’t you just a volunteer?” It is a common misconception that the workers at nonprofits are all volunteers. In fact, nonprofits are the third-largest employer in the United States. The real question they should be asking is “how much can you make at a nonprofit?” This question is harder to answer because it includes several factors.
If you are looking for a new career, the nonprofit field is an exciting venture that can offer the chance to work for a cause and quick career growth. A nonprofit salary tends to be a sticking point, though. The average salary for nonprofit organizations is $67,000, depending on location and position. This lower salary, along with the long hours, makes turnover a big problem with nonprofits.
This article will discuss how nonprofits pay their employees, how much you can expect to make at a nonprofit, and who makes salary decisions.
Can Nonprofits Pay Staff Members?
Most nonprofits have full-time staff. Sometimes that staff includes hundreds of people. If the employee’s primary role fits with the organization’s mission, they can be paid a reasonable wage.
Nonprofits are required to follow all federal and state laws when paying their employees. The current federal minimum wage is $7.25 an hour, but most states have their own minimum wage rates.
Beyond their minimum wage, each state’s salaries and hourly rates vary widely. What you can make in California is very different from Oklahoma. When determining a nonprofit’s salaries, an organization will want to research what other organizations in the area pay and include that in the decision-making process.
Turnover is a real problem with nonprofits. Since 2010, the nonprofit turnover rate has continued to grow every year. Offering a reasonable salary is an excellent way to retain staff and save your organization money in the long run.
What is Reasonable Compensation for a Nonprofit?
The question is, what is a reasonable salary for a nonprofit? The IRS determines reasonable compensation as the “value that would be paid for like services by like enterprises under like circumstances.”
The IRS has several rules that determine a nonprofit’s tax-exempt status. One of those rules discusses compensation for nonprofit employees. The IRS Inurement rule specifies that a nonprofit’s income cannot benefit insiders like important employees. This rule is fairly vague and does not apply to most nonprofits.
While it is rare for the IRS to rule against an organization based on salary, people have begun to notice high-paid nonprofit CEOs. When deciding to donate to a nonprofit, many people have started researching these salaries to determine what percentage of a nonprofit’s income is going to staff versus those in need. An unreasonable nonprofit salary can decide whether the organization gets a gift or not.
How Do Nonprofits Pay Their Employees: Fixed or Variable Compensation?
When you read about these large compensations, it often gets confusing because payment for higher-paid positions is not always limited to a fixed annual salary. In recent years, nonprofits have begun to follow for-profit companies and offer bonuses to employees based on what they bring into the organization.
In these cases, a CEO or executive director with a successful fundraising year can earn a bonus that increases their income to reach six figures. This type of payment is called a variable payment.
Variable compensations can open the field to better quality employees for a nonprofit, so it is an excellent idea if the organization is having trouble recruiting talented staff. The issue comes when that compensation does not match with the employees’ success. If a nonprofit continues to raise an employee’s salary but does not see a return on their investment, they are short-changing their donors and increasing their chances of being scrutinized by the IRS.
Variable compensation has become increasingly common with nonprofits for upper-level staff, but they rarely offer it for lower-paid employees. This may be a mistake since nonprofits have started to need better-trained and higher-skilled individuals to help their organizations succeed.
New technology can help nonprofits monitor the success of their employees. In addition, offering variable compensation for all roles can increase nonprofits’ chances of getting higher-skilled employees.
What Factors Affect Nonprofit Salary Ranges?
It is important to determine what may decide your salary before interviewing for a nonprofit. When they ask you how much you want to make, you can give them a range that fits their expectations.
Several factors determine a nonprofit salary:
1. Geographic location
This may seem obvious, but if you live in a city like New York or Los Angeles, you will likely make more than someone living in the suburbs. This difference in salary is due to cost-of-living differences. Cities are more expensive, and companies that do not pay a living wage will have difficulty finding qualified employees.
2. Organization size
Larger organizations will likely continue to pay more since they have found certain success and can pay more. These nonprofits may also have a board and human resource department with a better understanding of how to compensate employees and increase their benefits.
3. Nonprofit type
All nonprofits are not the same. Healthcare organizations, like hospitals, qualify for tax-exempt status with the IRS but raise much more than your local pet shelter. Thanks to the more significant income nonprofits receive in the healthcare field, they can pay their nonprofit employees a higher salary.
4. Duties and responsibilities
Employees’ salaries will also increase with their level of responsibility and the duties they acquire. For example, an executive director or development director oversees staff and events as part of their job. Those who find success in these roles will be compensated better than others.
5. Qualifications and experience
Finally, you have heard that you will make more with a college degree, and in some cases that is true. Nonprofits may only be interested in hiring employees with a bachelor’s or master’s degree for higher-paid roles. These degrees and other levels of experience will determine an employee’s pay in the nonprofit and for-profit fields.
Average Nonprofit Salary Ranges in the USA
Nonprofit salaries may vary based on the employee’s role, but an organization’s size may be more of a determining factor. As you learn more about the following nonprofit positions, you will see how the size of an organization can change salary ranges even when the duties and responsibilities are the same or less.
The following jobs and salary ranges were listed on Salary.com:
1. CEO $141,000 – $241,500
This is the first example of how size can determine a salary range. Nonprofits with CEOs are often larger than your average local charity. These organizations need someone in charge with more experience running a large organization.
CEOs are expected to develop a nonprofit’s strategic plan, run its financial operations, and take on outreach for the organization. This is more than a 9 to 5 job, and the salary range is higher to compensate the CEO for their extra efforts.
2. Executive Director $70,900 – $102,800
An executive director is expected to do the same things as a CEO, but often for a smaller organization. This difference means you may go from a six-figure to a five-figure salary.
Once again, the Executive Director is expected to create the nonprofit’s strategic plan and budget. They will also most likely be the only or at least primary face of the organization with the community. The only real difference between this job and a CEO may be the number of employees and programs they are expected to manage.
3. Program Manager $66,000 – $85,900
A program manager oversees the nonprofit’s programs. The primary role of this employee is to make sure each program fits the organization’s mission and purpose. Program managers handle each of these programs’ budgets, staff, and activities and answer directly to the CEO in many cases.
They must be able to monitor and keep track of several projects within the organization, so a degree in nonprofit management can be beneficial in this role.
4. Program Coordinator $43,500 – $52,800
The program coordinator is second in command to the program manager. This person is the boots on the ground. They will be the ones to actually oversee the staff and volunteers of each project and answer directly to the program manager.
5. Fundraising/Development Manager $79,400 – $92,300
Fundraising managers are responsible for all fundraising activities, including events, grants, major donor solicitation, and more. This job may have the same number of responsibilities regardless of the size of the organization. The fundraising manager is expected to be personable and connect with donors one-on-one and in large groups.
The fundraising manager may also be expected to create a strategic plan and budget for the organization’s fundraising plans. In larger organizations, this role may also oversee a fundraising staff and volunteers. Otherwise, the responsibility to manage all volunteers and events falls on the fundraising manager’s shoulders.
6. Marketing Director $128,900 – $162,900
Larger nonprofits may also have a marketing director to hold the responsibility for all marketing materials that go out to the public. This person will monitor and analyze the success of each marketing campaign and either create or assist in developing future materials.
7. Volunteer Coordinator $48,300 – $58,200
A volunteer coordinator is another role that is likely only part of a larger staff, but the importance of this role should not be overlooked. Nonprofits rely greatly on volunteers to raise funds for the organization, help run events, and even work directly with the organization’s beneficiaries.
A volunteer coordinator manages these volunteers and helps in the management of the programs. Working with a program manager or coordinator, this job can help a nonprofit find greater success without spending money on employee salaries.
The volunteer coordinator oversees volunteer recruitment, training, and scheduling, and oversees how they do in their volunteer roles. This individual will have to keep track of volunteer files and collect feedback from both the volunteers and the people they work with.
What Role Does a Board Play in Determining Salary?
One of the primary purposes of a board of directors is to determine the salary for an executive director or CEO.
Nonprofit best practice says the individual who is being chosen should not be part of the decision-making process, so many boards create a separate committee to discuss this role before hiring.
Compensation for this role will likely be more than a salary, so the board will also determine any benefits and bonuses they will offer to find the most qualified candidate.
When it is time to decide on the executive director, it is best practice to educate the entire board on this individual and the expectations of the role. Then, each member should have a vote on determining who will become the nonprofit’s executive director or CEO.
Working at a nonprofit can be exciting and inspiring, especially if you have a real passion for the organization’s mission. However, the reality is that you must live in the real world with actual bills, so compensation for the work you do is essential.
Determining salaries for any organization is difficult. Nonprofits are no different. They should base nonprofits’ salaries on their budget and what others are making in the area. Knowing these factors before going in for the interview, you are a step ahead of the game. One of the best ways to check the salaries at a nonprofit is on their IRS 990 form. Nonprofits must list salaries for their executive director and highest-paid employees, so this gives you an excellent starting point for salary negotiations. You can find this information with the IRS, your Secretary of State, and companies like Guidestar.
Once you have landed that nonprofit job, Donorbox is here to help with all your online fundraising needs. Check out our blog for nonprofit fundraising and management tips.
Frequently Asked Questions (FAQs)
We’re going to answer some commonly asked questions on nonprofit salary.
1. Should I pay staff as employees or independent contractors?
This is a question that comes up often in smaller nonprofits since on the surface it seems cheaper to hire independent contractors and avoid payroll taxes.
The truth is nonprofits have little say in whether they are hiring an employee or an independent contractor. According to the IRS, to hire an independent contractor, the employer can only control the result of the work, not what will be done or how.
All income for an independent contractor is subject to Self-Employment Tax.
2. Can we pay nonprofit employees a bonus?
Nonprofits can pay employees a bonus that matches their benefit to the organization.
3. How are salaries paid in nonprofits?
Compensation for nonprofit employees is either paid with a fixed salary or hourly rate or a variable compensation that includes bonuses and other benefits.
4. Do nonprofits have to pay overtime?
Fair Labor Standards Act (FLSA) states that nonprofit and for-profit employees must pay overtime for non-exempt and exempt workers who work over 40 hours a week.
5. What is the minimum wage for nonprofit employees?
The federal minimum wage for nonprofits and for-profit organizations is $7.25. Many states have higher minimum wage rates, so the location of your nonprofit will determine what rate you must pay.