Executive Service Corpswww.Nonprofit-Consultants.org

Maine Association of Nonprofits

Setting Effective & Ethical Compensation Levels

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Presenters

Len Cole, Esq

Michael Daily, Executive Service Corps

Brenda Peluso, Maine Association of Nonprofits

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Agenda

Introductions/What do we want to learn today? History of the Survey What we have learned over the years Overview of 2010 Survey Using the Survey Salary Administration Case Benchmarking Benefits Annual Budget Cycle - CFO for a day Designing Benefits Programs

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Why?

Retaining good employees Turnover can be disruptive and costly

Being as fair and equitable as possible

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History of the Survey

Started in 1997 ESC joined MANP for the 1999 Survey ESC and NH Center for Nonprofits did 2005 NH

Survey NH joined Maine in 2006 – Moved to Online Survey

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What we have learned over the years

Salaries are uniform, if not identical, throughout Maine and New Hampshire

The Executive Director’s salary level is the major influence on senior staff salary levels

Budget size is the most important influence on Executive Directors and Senior Staff salaries

Statewide, regional and umbrella groups pay better Nonprofit salaries are high relative to for profit

salaries, but low when qualifications are taken into account

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What we have learned (Part 2)

On average men make more than women, in part because men tend to head larger nonprofits

Gender Equality has improved since 2003, although it slipped in 2010

We are doing better than for profits and better than nonprofits nationally on Gender Equality

The average salaries are not that accurate, especially for data sets less than 30 – can be +- 10%

Escalating group medical premiums crowd out raises and other benefits

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Economic Conditions & Salary Survey

Nonprofit Finance Fund Survey Wage and Benefit Survey in Northern New England

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Where we are today 2009?

What have you done to weather the recession?Develop a "worst-case scenario" contingency budget 65%Engage more closely with your board 59%Funder conversations to explain situation / use of currently restricted grants 48%Freeze all hires and current salaries 48%Use reserve funds 43%Collaborate with another NPO to provide programs 42%Reduce staff or salaries 41%Reduce or eliminate programs 39%Delay payments to vendors 23%Speed up the collection of receivables 22%Reduce staff hours (short weeks, furloughs, etc.) 22%Reduce staff benefits 21%Reduce or refinance occupancy costs 18%Collaborate with another NPO to reduce administrative expenses 13%Sell assets such as a building or securities 6%Merge with another organization 5%No change - business as usual 4%

Nonprofit Finance Fund Survey - 3/09

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Where are we today 2010?

What have you done to weather the recession?

Engage more closely with your board 58%Collaborate with another NPO to provide programs 47% Rely more on Volunteers 43%Develop Contingency Budget 39%Add/Expand programs 37%Hold Conservations with Funders 22%Freeze all hires and current salaries 21%Use reserve funds 21%Collaborate with another NPO to reduce administrative expenses 19%Reduce or eliminate programs 18%Speed up the collection of receivables 17%Expand geographies served 14%Reduce or refinance occupancy costs 13%Reduce staff or salaries 12%

Nonprofit Finance Fund Survey - 3/10 New Hampshire

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Other Key Points – From the Nonprofit Finance Fund

Volatility of nonprofit financial performance has increased with every recession

Nonprofits experience deficits during and after recessions – 5 year tail?

24% expect 2010 deficit vs. 32% actual in 2009 (NH) 61% of respondents have less that 3 months cash on

hand (NH) Most NH Nonprofits who rely on state and federal

funding expect more cuts in 2010

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Lay-offs

NH 2008 – 8% anticipating 2010 – 33% did in last 12 months 2010 – 15% anticipating one

Maine 2008 – 10% anticipating 2010 – 38% did in last 12 months 2010 – 13% anticipating one

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Economic Conditions - 2008 to 2010

Unemployment in NH went from 3.6% to 7.7% to 5.9%

Unemployment in Maine went from 4.9% to 8.3% to 8.1%

Maine moved for 35th to 30th in Per Capita Personal Income

NH moved from 9th to 8th in Per Capita Personal Income

Inflation was about 1.2% or .6% a year

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Wage & Benefit Survey

Huge increase in participation!

NH Maine

2008 153 212

2010 218 347

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Salary Averages – Up!

Index of 27 jobs in $/Hr

NH ME

2008 $20.04 $20.07

2010 $21.87 21.11

9.1% 5.2%

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Executive Directors’ Salaries2008

NH

2010

NH

2008

Maine

2010

Maine

Under

250K

$47,091 $47,840 $46,301 $43,638

$250K –

$500K

$61,422 $62,962 $61,838 $54,408

$500K –

$1M

$66,422 $71,635 $74,506 $72,613

$1M –

$5M

$87,173 $95,680 $88,130 $91,582

$5M –

$10 M

$110,739 $118,560 $95,784 $97,573

Over

$10M

$134,909 $125,070 $118,456 $126,173

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Executive Directors’ Pay Changes over 2 years

Up 2.3% in Maine Up 4.9% in NH

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Gender Differences – Executive Directors

NH Under $1M 65% Female/35% Male NH Above $1M 53% Female/47% Male

Maine Under $1M 60% Female/ 40% Male Maine Above $1M 53% Female/47% Male

However a larger portion of the Male Population is in the bigger nonprofits

Correcting for Size NH Female ED’s make $.894 for every $1.00 that Males make

Correcting for Size Maine Female ED’s make $.937 for every $1.00 that Males

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Maine Gender Graph

Maine Wages in 2008 and 2010 by Gender and Budget Size

0

10

20

30

40

50

60

70

< $250K $250K - 500K $500K - $1M $1M - $5M $5M - $10M >$10M

Budget

Wag

es in

$/H

r

Male 2008 Female 2008 Female 2010 Male 2010

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Benefits are Reduced as a % of Salary2008

NH

2010

NH

2008

Maine

2010

Maine

Under

250K

12% 7% 11% 6%

$250K –

$500K

16% 12% 13% 12%

$500K –

$1M

17% 16% 20% 17%

$1M –

$5M

17% 16% 22% 20%

$5M –

$10 M

21% 16% 23% 24%

Over

$10M

25% 27% 24% 24%

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Benefits Cuts - Summary

NH Group Health offerings dropped from 83% to 75% of nonprofits

Maine Group Health offerings dropped from 84% to 74% of nonprofits

25% of nonprofits do not offer Group Medical In NH the only benefit out of 22 that was found in a

larger % of nonprofits was Retirement Counseling (5% to 6%)

In Maine only three benefits out of 22 increased: Health Wellness (1(% to 20%) Child Care Assistance (4% to 6%) and Retirement Counseling (3% to 6%)

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Conclusions

NH faired better than Maine Large nonprofits did better than small nonprofits

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Using the Survey - Wages

Service providers, such as Case Workers, are similar across all organization sizes, while management, such as Program Directors, is paid more in larger organizations

Service Providers – Take the average from W-4 For Management – Take the average from tables

by Size W-6 to W–11 For Part Time – Go to W– 5, if not there, use 90 to

100% of Full Time Inflation Adjustment – If you are using next year

(2%)

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Examples

Executive Director - $350,000 Budget Finance Director – $3,000,000 Budget Program Director - $1,500,000 Budget Director Care Worker - $500,000 Budget

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How do I use the other data

Region Mission Education

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Case Using Comp Rate

Definition: Compensation Ratio, Comp Ratio, or CR A Comp Ratio of 1.0 is the Average Salary for the job as

shown by the survey. It is seen as the “fair market wage”

A CR of .8 is 80% of the Average Salary, while a CR of 1.2 would be 120% of the Average Salary.

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Comp Rate - Principals

For most jobs a reasonable range is CR .8 to CR 1.2 In most cases CR .8 to CR 1.2 encompasses the least and

most that an employer would expect to pay. For most jobs the starting salary should be CR .8 The salary scale should move up annually with the CPI. Salaries increase with experience and demonstrated

performance. Consider a target CR of 1.1 to keep good employees.

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Setting Salary Ranges – Using Compensation Ratios

Average1.2 CR.8 CR

StartingSalary

Benchmark5 Years

Experience

Top Performers

More ExperienceMore

ExperienceBetter

Performance

MovesAnnually with

CPI

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Setting Salary Ranges – Example Case Manager

Average1.2 CR.8 CR

StartingSalary

Benchmark5 Years

Experience

Top Performers

More Experience

More Experience

Better Performance

$13.56 $16.95 $20.34

Moves annually with

CPI

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Setting Salary Ranges – Example Case Manager – Annual Increases with 2% Inflation

Average1.2 CR.8 CR

2% - 4%+2%

1% - 3%+2%

0+2%

More Experience

Better Performance

$13.56 $16.95 $20.34

Moves annually with

CPI

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Text Text Text Text Text Text

$16.95 $20.48$13.42$11.00 $35.25

Median$16.22

CR .8 $13.56 CR 1.2 $20.34CR 1.0

3rd Quartile$18.00

1st Quartile$15.00

Case Manager with CR and Standard Distribution

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What about jobs not in the survey?

Guidestar – 990’s Other nonprofits or for profits Ads Salary.com Interpolate Other surveys – Museum Association

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Benefits

How broad are your benefits? Who pays for them – cost sharing?

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Benchmarking Benefits

Benefits 2008 2010 My Nonprofit

Group Health 83% 75%

Group Health for Dependents

73% 66%

Jury Duty Leave 66% 61%

Family Medical Leave 58% 57%

Group Dental 59% 51%

Pension Plan 61% 50%

Group Life Insurance 55% 49%

Maternity Leave 48% 48%

Group Dental for Dependents

54% 46%

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Annual Budget Cycle – CFO for a Day

What was the compensation budget for this year? Wages Benefits Payroll taxes Worker’s Comp

Change in Staffing? New programs Layoffs

What can we project for increases? Benefits Newer workers project at time in grade Longer term average CPI + 2%

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Annual Budget Cycle

What can we afford? Add or delete Benefits? Change Cost Sharing? How big is the raise pool?

How do we allocate it?

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Benefits Design

Consider Mix Older workers Younger workers Young families High vs. Low wages

Employee Surveys can be a big help

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Len Cole, Esq.

IRS Compliance

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Executive Service Corps Contacts

Michael Daily – ESC Northern New England (207) 641-2300 (603) 362-9300 Michael@Nonprofit-Consultants.org www.Nonprofit-Consultants.org