How do nonprofits decide how much to pay their employees? This question is frequently asked of us, and there is not one clear answer. In fact, Washington Nonprofits has struggled to determine what is fair compensation for our staff. Going into 2021, we decided to do some work to determine if our team was being paid livable and competitive wages. Here are a few of the things we learned.

It is important to start with a conversation about your goals and your values as an organization. How do you want to position yourself with regard to the market? How will you achieve internal equity? Are there ways you want to shape your compensation to align with your mission and values? How transparent do you want to be regarding salaries?

We decided to engage a compensation consultant to help us. I educated myself on some of the issues by reading and attending several webinars focused on equitable HR practices. After I understood some of the issues and decisions we would face, I talked with several consultants, and chose to work with Nancy Kasmar of Compensation Connections. She had the right mix of knowledge and practicality and was clearly well-qualified to complete a market survey for us at a reasonable price. 

We set two goals: 1) develop a written compensation strategy and 2) complete a market study and use that to help us establish pay grades and ranges for each staff position. 

For the compensation strategy, I solicited input from all board and staff members using questions suggested by Nancy, and then I worked with Nancy to create a draft compensation strategy. The strategy is still in draft form and will be circulated internally for further input before we finalize it.

To complete the market study, I worked with staff to update all job descriptions and ensure they accurately reflected each staff position. This information was passed off to Nancy and her colleagues so they could compare the jobs with multiple salary surveys to build a sense of what each job was typically paid in the marketplace. We had to identify our competitors (other nonprofits and state and local government) and the geographic region we wanted to benchmark against (although our staff work statewide, we elected to compare with King County salaries). I reviewed the job matches they identified to see if they seemed accurate and we made some adjustments as needed.

There are some other important considerations you might want to include if you are doing a compensation review:

  • Ensure that your positions are correctly classified as exempt or non-exempt.
    • Reminder that to be classified as exempt, employees must meet certain requirements: they must perform specific job duties, which are defined by the regulations; they must be paid on a salary basis; and the salary they earn must meet or exceed a minimum salary threshold.
  • Make sure your non-exempt employees’ wages are above minimum wage and salaries are above the Washington State overtime threshold for all exempt positions.
  • Find out what the living wage is for your area using this living wage calculator.

We made sure that our lowest paid employee makes a living wage, and that we are in compliance with state and federal employment rules.

Another consideration is total compensation—looking at the range of benefits that, along with pay, make up the compensation offer. Total compensation includes: health insurance, retirement savings, life and disability insurance, paid sick and vacation time (in our case, combined paid time off), flexible scheduling, and more. All these have the potential to make a workplace more attractive to more candidates. Organizations have to balance the cost of these items against the cost of salary and wages and decide on the right mix. However, investments in these items do not count toward minimum wage or overtime threshold requirements—only certain direct financial compensation is used to meet these requirements.

We also discussed what could make our compensation strategy more equitable. There are some things an organization has to do legally such as avoid discrimination and pay people equally for doing the same job. Given our commitment to racial equity and building an inclusive workplace, we want to go well beyond what is legally required. In addition to being aligned with our values, we think increasing equity will also attract and retain great talent. Here are some of the equity measures we learned about and considered (some more radical than others):

  • Give bigger raises to lower paid staff to narrow the pay differential among staff, rather than the traditional approach of awarding a percentage of salary
  • Offer a contribution to staff’s retirement plan without a match requirement
  • Contribute to paying down employees’ student loans
  • Pay a premium for bilingual skills and/or lived experience and cultural knowledge
  • Set a maximum ratio for highest to lowest paid staff, e.g. 3:1
  • Increase professional development budget for BIPOC staff
  • Unlimited PTO
  • Move away from set holidays to allow greater flexibility and accommodate different faiths
  • Family-friendly benefits, e.g. generous parental leave
  • Time off for volunteering, voting, or civic engagement
  • Differentiated bereavement depending on the circumstances of staff, e.g. an immigrant needing more leave to travel internationally
  • Published pay ranges and transparency around pay

The compensation review will support transparency around pay ranges, and we are exploring how to implement a retirement contribution and premium pay for bilingual skills next.

Diving into compensation took time, but it is a great step forward for us as we “grow up” as an organization and seek to care for our staff and become a sought-after workplace.

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