Executive Compensation and Non-profitsTax Professionals' Resource
April 18, 2013 — 1,312 views
Nonprofit organizations should develop strict policies regarding executive compensations as they are closely monitored by the IRS. The IRS rules state that the compensation package for non-profit employees should be of a reasonable value. The reasonable compensation given to an executive will depend on many factors which are detailed below.
Consider the Responsibilities
The compensation paid to an executive of a nonprofit organization should vary with the job profile and the responsibilities that are undertaken. The responsibilities of an administrative assistant will not be similar to that of an office manager. Do identify the exact responsibilities of the job that is performed by the executive so that an appropriate salary can be fixed. This can be done by referring to the Occupational Handbook available from the Bureau of Labor Statistics. The handbook lists the common responsibilities and the appropriate salary to be paid for each category of job profile.
Consider the Job Profile
One of the main factors which influence the compensation of employees in nonprofit organizations is the actual job profile. The type of work done by an executive can have a significant impact on the range of salary offered. The pay scale of employees of the same status will vary with each organization. The pay of an executive in a hospital will be different from that paid in a trust or a non-profit foundation.
Consider Regional Salaries
The compensation given to the executives should also depend on the average compensation offered to people with similar job profiles in your territory. For this, you will have to look at the national salary range for people in similar positions. After this, you will have to narrow down your consideration of jobs in the concerned city or state. This will help to give you an idea about the salary range of the relevant job. You can also make a comparative study between corporate jobs and non-profit jobs to get an idea about where your salaries fit into.
Consider the Experience
The compensation given to non-profit executives should also depend on their experience levels. According to a recent study conducted, there is a huge difference of 50,000 dollars in the pay scales of executives who have just entered the job market and in the executives who have more than 20 years of experience in the field.
Consider Non-Monetary Benefits
While fixing the salary for executives of non-profit organizations, take into consideration the non-monetary benefits that you are planning to offer. Executives of non-profit organizations often enjoy the perks of flexible working hours and locations as well as paid working days. You may also have to provide additional perks like retirement benefits and health insurance for your employees.
The Other Factors
Educational qualifications should also be considered while deciding upon the compensation. If the executive is a part-time worker, then the compensation will be based on the number of working hours put in by the employee. Finally, while deciding about the compensation, do keep in mind the overall budget of your charity. The compensation given should not exceed the amount that is available for your charity.