NONPROFIT WAGES FALL BEHIND NATIONAL WAGES

By May 23, 2017Blog

Recently, PayScale, Inc. released their 2017 Compensation Best Practices Report (CBPR). One key metric pulled from the report is that wages in the nonprofit industry have fallen behind the national average. Nonprofit wages outpaced the national average during the recession. Since then, however, nonprofit wages have failed to keep pace.

“[At a] nonprofit, there’s sometimes a temptation or even an imperative towards fairness in a values-driven environment,” wrote Mykkah Herner, PayScale’s Modern Compensation Evangelist, in an article accompanying the PayScale report.

Nonprofits seem to often struggle with whether or not to pay fundraising staff competitively to market, or use an internal bar for paying them and focus on paying equitably across the organization and the programmatic staff.

“Your choice will depend on your organization and how well you can communicate the rationale behind your pay strategy. You can pay both groups the same, depending on their level of responsibility and contribution to the organization,” wrote Herner. “If you decide to do so, you’ll have to decide if you intend to overpay programmatic jobs or underpay fundraising or development jobs.”

PayScale produced a nonprofit specific fact sheet from their data. Included with in the fact sheet are key nonprofit insights, such as:

  • Nonprofit organizations are twice as likely as other organizations to base increases on cost of living
  • Compliance, both minimum wage and FLSA, impacted compensation strategies for nonprofits in 2016
  • Nonprofits are more focused on perks and less on cash than other organizations, also much less likely to utilize variable pay

PayScale believes organizations are now taking an updated approach to their pay policies and processes to build trusting relationships with employees and drive deeper engagement. However, the research also shows a chasm still exists around compensation, as employers were more than twice as likely as employees to believe pay is already fair. Employers can do even more to modernize their pay practices, such as increase pay transparency, use current market data to set pay and train managers to initiate open dialogue about pay so their employees feel valued and — ultimately — don’t look for greener pastures elsewhere.

“Our most recent research shows that many companies are moving away from pay as a transactional experience that has historically been shrouded in secrecy. We’re also seeing that ‘how’ a company pays is really as important as ‘what’ a company pays its employees,” said Mike Metzger, president and CEO at PayScale. “Compensation policies reflect the culture at an organization. Employers who pay fairly for competitive positions and foster open dialogue around pay will build more trusting relationships with their employees that, in turn, will impact the bottom line.”

Below are additional across-sector findings about pay practices and employer attitudes from the 2017 Compensation Best Practices Report, including compensation approaches from top-performing organizations:

  • Employers and employees disagree on “fair pay.” Forty-four percent of employers say their employees are fairly paid, but only 20 percent of employees agree.
  • Organizations set their sights on increased transparency. Currently, 31 percent of organizations identify themselves as being transparent (a level three or greater on PayScale’s Pay Transparency Spectrum). Nearly half of all organizations aim to be transparent in 2017 (49 percent).
  • 2016 marks the return of cash. Thirty-four percent of organizations say the highest base pay increase they gave to an employee topped 10 percent. In addition, 11 percent reported an average increase over 5 percent.
  • The C-Suite cares even more about comp. Fifty-seven percent of organizations agree that employee compensation is becoming more important to their executives.
  • Fresh data is critical. While 53 percent of organizations have done a full market study within the past year, 47 percent reference market data for individual jobs more frequently than annually. Thirteen percent do so at least weekly and that number rises to 39 percent among enterprise organizations.
  • Top-performing organizations pay differently:
    • They are more likely to pay higher for their most competitive jobs that impact the bottom line.
    • They are more likely to train their managers to talk with employees about pay.
    • They are more likely to say that they pay their employees fairly; 52 percent versus 42 percent of typical companies.

The CBPR is based on data from 7,700 survey respondents – including more than 400 nonprofit organizations. To view the entire Compensation Best Practices Report, please visit: http://www.payscale.com/cbpr

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