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Compensation Plans for Nonprofit Employees Featured

Compensation Plans for Nonprofit Employees Windows

Strategic compensation of employees is a crucial ingredient of success for any nonprofit. Proper compensation of employees for their hard work and thanking them for a job well done sets a tone for proper employer/employee relationships. It provides the right foundation for the sustainable growth of a nonprofit. This increases employee retention rates and long-term engagement. However, developing an employee compensation strategy for a nonprofit is never easy. Luckily, the payoffs are worth the struggle, especially for nonprofits that seek to retain their staff and keep the morale of their staff high. Balancing all these aspects is easy said than done. However, it may be easy for some organizations.

Developing incentive programs for nonprofits

Every nonprofit works differently. Therefore, the incentive programs also vary from one organization to the other. As such, incentive programs must reflect the unique mission, vision and objectives of a particular organization. Begin with brainstorming ideas of the type of incentive programs that will fit your organization and the employees. Some of the programs that are largely used is are project milestone bonuses, annual performance bonuses, commission-based compensation programs, ad hoc bonus schemes and profit-sharing approaches. Bring on board the right people, including those from human resources, management, finance and staff, to help with this project. While the management can help develop metrics and objectives, the HR team, on the other hand, will help assess the prevailing marketing conditions and develop the salary ranges.

How much should you pay your employees?

Like any other employer, tax-exempt charities must follow the existing federal and state laws on wages. These laws require employers to pay a minimum wage for their staff. The compensation must be reasonable and should never be excessive. Before hiring specific individuals, you need to review their comparability data in the geographical area, including the salary and benefits offered by other nonprofits with similar budgets, mission focus and budgets in the same area.

Minimum wage and overtime

Ensure that your employees are paid the legally stipulated minimum wage. This can differ from one state to the other. However, consider the federal minimum wage rate and ensure you pay your staff accordingly. There can be some overtime payment if staff work for more than 40 hours a week.

Executive compensation best practice

The executive director or CEO’s compensation should be approved annually. This is a critical best practice that a nonprofit’s board of directors should be aware of always. When analyzing the total compensation of an employee, fringe benefits that may include paid leave and development opportunities such as education should be considered.

Understand the desires and interests of employees

Different employees and generations have different desires and interests. This can also be different when it comes to benefits. For example, the younger professionals worry more about student debt, professional development, and the flexibility of their jobs. On the other hand, older workers are concerned about mortgages, college fees for their kids and pension. They also worry about the cost of healthcare for their parents and more. If you are not sure of the right benefits for your employees, consider asking them. You may use a survey to get the right information to incorporate into your organization’s compensation strategy. If you have low budgets to run your operations, look for those who fit into your budgets. Furthermore, look for new hires that have similar values as yours. These are individuals you can easily communicate shared values daily and maximize retention.

Regardless of the direction you take, ensure that you build a strong compensation strategy and long-term programs that will protect your organization against damages caused by employee turnover.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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