The question of salary in non-profit organisations usually refers to the compensation for the chief executive officer (often called the executive director) . Salaries of support staff, such as administrative assistants and book-keepers, are more easily determined by prevailing rates in the region in which the organisation is located. Board members are considered to be volunteers and are usually not compensated.
Non-profit organisations receive favoured tax status from the Internal Revenue Service because they perform services that benefit the community. A non-profit with overhead exceeding 25 per cent of the budget is considered to be ineffective and, therefore, the overall budget enters into the computation of staff salaries.
Determining the CEO's Salary
The CEO’s salary is based on years of experience, size of past budgets managed, number of staff supervised and education and certifications. Previous management experience, such as hiring, firing and evaluating and promoting employees, is also considered. The scope of management is also significant. Did the candidate manage employees within one functional area or across functional areas with the organisation?
Pay scales and cost of living vary greatly from region to region. Compensation for non-profit CEOs in New York City would be considerably higher than in the rural South, for example. The median income in any given region can be found on the U.S. Census Bureau website. Generally, the salary of a non-profit CEO is not quite as high as the salary of a for-profit CEO, though they may be doing the same type of work.
Tools for Determining Salary
Both PayScale and Salary Wizard have free online tools for calculating non-profit CEO compensation in different cities. You will enter information on experience, former salary, education and level of management responsibility and the calculators will provide a range of reasonable salaries for the CEO.
The salary for the CEO must be decided with care by the board of directors. To underpay the leader of the organisation will risk the seeking of better opportunities elsewhere while overpaying the leader may put the overhead expenses (and ultimately its donors' trust) at risk.
Non-Profit Compared to For-Profit Managers
Non-profits include hospitals, educational institutions, churches and community service organisations. According to the Bureau of Labor Statistics, “Managers in non-profit organisations earned wages that were not significantly different from those in state government; however, their wages were lower on average than managers in all private industry and in local government.”