As is true in many areas of a nation where one’s perceived value is often tied to how much money one makes, salary is a huge issue in the nonprofit arena. Historically, nonprofits have paid significantly lower wages to their employees than is true in the for-profit world. Two of the greatest challenges facing the nonprofit employer and workforce are: one, the salaries of nonprofit employees are often less than their counterparts in industry and government; and two, the inability or lack of willingness of nonprofits to contribute to their employees’ retirement funds.
Complicating this matter even further is that when you take on a social enterprise you need to step out of the traditional nonprofit comparisons, and start looking at what for-profit companies are paying to recruit and retain qualified people in a specific business industry.
There are no textbook answers to two fundamental questions:
- Can you afford to compete with the for-profit companies to get and keep good people?
- Should social program and business staff be compensated equally?
The following are common perspectives from social entrepreneurial organizations.
Can you afford this?
It is important that your Board buy into paying market driven wages and that compensation issues have been thoroughly discussed and agreed upon prior to embarking upon or expanding a social enterprise. The community, and other stakeholders, may have questions about salaries which you and your Board will need to be ready to address.
Most leaders in the social entrepreneurial field agree that to get and keep qualified people in your social venture you have to be able to afford this. You must look at what your competitors are paying their staff, and your salary base should be at least in the low end of the pay range. Rick Aubry, Executive Director of Rubicon Programs, states “to think that people will be willing to sacrifice significant compensation because it is about ‘the mission’ is simply aggrandizing and not terribly realistic.”
Most nonprofit employees aren’t attracted to the nonprofit sector for the money, but for an interest in what the organization does and the desire to make an impact in their community. However, money is usually cited as the number one reason nonprofit employees leave the sector. Although candidates may want to work in their community, you must be realistic about what people can and are willing to give up monetarily.
Realistically, smaller social enterprises cannot directly compete with for-profits, which can offer incentives such as stock options and dividends. Grants and public funds traditionally do not allow for paying employees above the “standard” nonprofit wage — they prefer that their dollars go into direct services. Therefore, each agency must review their overall budget to determine what their unrestricted funds can support and come up with creative packaging to entice talented individuals to join their team. Some examples are:
Performance based bonuses
These should be tied to both business and social goals. The money for these bonuses should be built into the income projections for the business. Remember to check the IRS guidelines prior to setting up such a structure.
Giving a good vacation/sick package is often a way to have a “perk” that may exceed the for profit community’s.
Appealing to the pioneer and entrepreneurial spirit
Managers of social enterprises are given the opportunity to explore the new and dynamic field of social entrepreneurism. For an entrepreneur, the opportunity exists to have all the challenges and experiences of running their own business without having to put up their own money.
And, finally, don’t underestimate the power of people’s need to work for a cause in which they believe. People who have extensive work experience in the for-profit world sometimes “feel like something is missing”, and want to be given the opportunity to fill that void.
Are social staff and business staff compensated equally?
Organizations vary greatly on this topic. At some social enterprises, the pay structure is based on the positions’ requirements, including skill level, experience, and education. Support service salaries are set slightly above what other nonprofit agencies are paying for comparable positions, and business salaries are set to be competitive with the for-profit industry.
Each social enterprise will need to decide what its own level of comfort is in terms of compensation. Thoroughly research any existing documents that will give you a gauge of both nonprofit and for-profit wages. For example, one resource often used in determining support team salaries in the Bay Area is the Wage and Benefit Survey of Northern California Nonprofit Organizations. For business team salaries, internet job listings and contacts in various local industries can be resources to determine prevailing wages.