How to Increase Pay at Your Nonprofit

Nonprofits have the unfortunate, and often accurate, reputation of paying staff poorly — with some staff earning so little they qualify to use the charity’s services. Amid economic uncertainty and high inflation, some leaders are pushing back against low pay and looking to raise staff salaries.

“Our sector sometimes is proud of the fact that we’re cheaper, saving money, and we’ve got the lowest overhead ratio,” says Cathy Taylor, former executive director of the Ontario Nonprofit Network, who now leads the Lawson Foundation. “That’s not a competition to be proud of [winning]. Investing in your people that do great work is something to be proud of.”

Taylor and others who have led efforts to increase nonprofit pay say charities can pay their staff better. With commitment, cooperation from key stakeholders, and some strategic thinking, they have found ways to boost compensation for their teams. 

Stop treating wages as overhead.

The first step is to really shift your mentality about pay, says Taylor. “Don’t buy into the idea that wages are overhead,” she says. “Wages are a critical part of the work.”

When salaries are framed as overhead, it creates a desire to keep them small — which doesn’t serve your mission, adds Courtney Thomas, CEO of Newhouse KC, a nonprofit  helping people escape domestic violence. About half the organization’s budget goes to salaries. Since becoming CEO in 2019, she says, she has taken the budget from roughly $2.5 million to nearly $6 million.“You can’t expect people to work themselves to death wearing 50 different hats and working 65 to 80 hours a week and expect your organization to thrive,” Thomas says. “You will not achieve the level of success that you were destined to experience by not investing in your people. You don’t have to take big, drastic steps, but take some small steps.”

Understand the costs of low pay.

To change course on pay, it’s important to understand what low pay is costing your organization and where you stand, says Michelle Murray, CEO of Living Wage for US, a nonprofit that helps employers bring staff pay up to a living wage. 

“There’s a huge cost to turnover: job postings; time to interview, reviewing resumes and training new staff; lost productivity. All of this stuff has a tremendous cost,” she says. If they haven’t already, Murray says nonprofits should start tracking staff time spent on hiring and onboarding and estimate past turnover costs.

Additionally, nonprofits should compare their salaries with others in their community using local living wage data or HR pay scale data. 

“The most important thing is to do your homework,” says Taylor. “Be able to articulate, here’s where we are now and here’s where we need to be. The transparency about the data really helps boards and funders understand.” 

Talk to your board.

Explain to your board what low pay is costing and how much it needs to increase, says Minor Sinclair, who is now a consultant but previously raised staff pay as executive director of the Center for Progressive Reform. “Getting the board support was really helpful because as the ED, I draw up the budget, but I don’t approve the budget,” he says.

Some boards are all for it, but others aren’t.

“Sometimes the barrier is the board,” Taylor says. “They’re coming from a place of wanting to provide as many services as possible to as many people as possible and looking for the most economical way to do that.”

Often board members believe paying low salaries is the “economical” solution. If the board is reluctant to increase staff pay, start with the most amenable board member, who might be able to champion the proposal, Taylor says. Another tactic, she says, is to invite a board member from a peer organization that raised staff pay to talk to your board.

Then loop in your staff.

Once the board is supportive, leaders can tell staff about their desire to raise pay, says Murray. This lets them know you’re aware of pay concerns and trying to address them. If staff believe pay will increase, “it’s much more motivation to stay,” she says. 

Plus, talking to staff allows the organization to better understand their employees’ pain points and figure out if there are benefits that will improve their quality of life. “If you want to be really effective, you’ve got to bring people into the decisions and give them an opportunity to share what matters most to them,”says Thomas.

Murray says some CEOs worry that talking to staff while the organization formulates its plan will cause problems, but she’s found these conversations backfire only when there’s no follow-through.

“What staff don’t respond well to is leaders saying, ‘We’re planning on this we’re all going to talk about it,’ and then they don’t see some sort of action,” Murray says. She and others suggest leaders offer updates on a regular basis with timing that feels appropriate, such as every 90 days.

Spread raises over several years.

Improving pay can take a few years, depending on how far away an organization is from its goals, says Taylor. So it’s important to think through how to structure the increases.

Look at overall compensation — including benefits — when thinking about raising pay, Murray suggests.

“How do we get this done when we maybe don’t have the budget to do it?” she says. “That’s usually where benefits come into play.”

Review what you offer for health care, 401(k), and child care reimbursements, Murray says. Many nonprofits aren’t aware of strategies that allow them to provide tax-free reimbursement for health care and child care. This is especially helpful to small nonprofits that can’t afford costly group benefits plans. Offering benefits is more cost-effective than raising salaries, Murray notes, because employees rarely use all of them.

When considering wage adjustments, some organizations focus on closing the gap for their lowest paid staff first. 

That’s what Karen Green did when she was executive director of the Cat Adoption Team, a cat shelter in the Pacific Northwest. Now a consultant, she says the goal was to help those struggling the most get to sustainable wages. However, that strategy can cause friction. Green said some employees were frustrated that newer staff were getting higher percentage increases than longtime employees. “It was very complicated,” she says. “We were trying to do a sea change for the whole organization.” While it ultimately worked out, she spent a lot of time answering questions about pay.

That didn’t happen at the Center for Progressive Reform, says Sinclair,  even though the lowest paid staff saw 30 percent increases and higher paid staff got 3 percent.

Other options, says Murray, include covering the cost of inflation so staff don’t lose ground year-over-year and then trying to add 3 percent on top of that. 

See if the money you need is already in your budget.

Organizations that successfully increased staff pay found money by scrutinizing their budgets to identify expenditures that could be reallocated and by raising additional money. Thomas suggests starting with your current budget to see if savings can be realized by, for example, renegotiating vendor contracts.

“Don’t be afraid to look at where you’re spending your money to make sure it’s a more valuable place than spending it on your staff,” she says. “And nine times out of 10, the answer will be, it’s not.”

Most funders respond well when nonprofits commit to a living wage. When we make it clear that we’re engaging in a living-wage project because we want our staff to be treated with the same dignity as our clients, that has landed quite well with funders, Murray says.

Murray notes that as nonprofits improve employee retention rates, they save on turnover costs that can be invested in other priorities.  

For Green, it was important to set stretch budgets and work with the fundraising team on achieving them. If we focus too heavily on constraints, then we have a whole bunch of overstressed, underappreciated staff, and we are not creating work that donors want to support, she said. “Investing in our people, in our staff was a really crucial way to create programming that was inspiring to our diverse group of donors.”

While raising pay may feel daunting, “my advice is always to slow down before you speed up,” Thomas says. “Make sure that what you’re doing aligns with who you say you are and the impact you deliver within the community. Don’t be afraid to recalibrate.”

For Green, it took roughly a decade to raise pay for staff to levels the group set as goals, which were based on regional salary data. Because of inflation, the goal posts kept moving, as higher salaries were needed to be competitive. “We took as big a step as we could each year, and it did take a long time,” Green says. 

Getting there paid off. “We stopped getting employee feedback saying, ‘I can’t afford to live decently and work here.’ We weren’t the crappy-paying shelter in our community anymore. Our reputation as an employer had changed.”

Implementing increased pay often relies on fundraising; check back next week for an article on specific fundraising strategies to help you boost worker pay.