Compensation, benefits survey shows modest growth in 2015

The Grant Thornton 2015 Nonprofit Compensation Survey Visit our ordering site for a copy of the full survey.

Executive summary As the economy continues to recover, the not-for-profit sector is reaping the benefits of increases in donations from all sources. On the flip side, this positive financial environment puts not-for-profits at risk of losing top talent, particularly in key functions such as fundraising, IT and executive positions. Among other inducements, an effective rewards program is essential to attracting and retaining great talent.

Comp benefit survey 2015The effectiveness of your rewards program depends on appropriate data to understand the market and assess the competitiveness of your program within it. To that end, Grant Thornton LLP offers our 2015 Nonprofit Compensation Survey as a resource. Now in its third year, the survey has again been developed in partnership with Columbia Books Inc. Our surveys have proven their value to not-for-profits of all sizes, sectors and geographies. As in past years, you’ll find up-to-date critical compensation and benefits data, trends, and insights to assist in ensuring that your compensation and benefits program is designed effectively for competitive positioning.

This year’s survey is similar to years past with insights into trends and what the data is indicating, but it also goes a step beyond, with expanded coverage and detail:
  • Compensation philosophy and practice
  • Incentive design data
  • C-suite position data, highlighting practices for disqualified persons and key employees
  • Board compensation practices

The survey provides comprehensive information about a variety of jobs and subsectors from numerous participants:
  • Compensation data for more than 100 job titles
  • Data for an array of subsectors, including trade associations, human services organizations, educational and cultural institutions, public benefit organizations, health care organizations, special interest entities, and scientific and research institutes
  • Participation from over 800 organizations from all 50 states

Data covers essential elements of total compensation:
  • Base salary (annual fixed compensation)
  • Bonus/incentive compensation (e.g., variable compensation, discretionary bonuses, annual incentives and long-term incentives)
  • Benefits (e.g., qualified and nonqualified benefit offerings) 

Evolution in the marketplace calls for progressiveness in reward Competition for top performers continues to escalate. Our survey shows that while overall budgeted salary increases appear consistent year over year, compensation and benefits plans that worked in previous years — even last year — won’t be adequate to meet the expectations of today’s talent marketplace. While continuing to be mindful of the alignment of administration costs to mission expenses, organizations must avoid losing valued high performers because of competitive market pressures. It remains a mission-driven and strategic necessity for organizations to review total rewards offerings and compare them to reliable industry-specific market data. It is also a necessity for meeting expectations of stakeholders and regulators.

2015 shows modest budget and salary growth
At 3.06%, average salary increases remained consistent with last year’s, but smaller organizations are reporting higher increases than those with larger operating budgets. This could be a result of “playing catch-up” now that overall economic and financial conditions are more positive.

General salary trends for survey participants  
Projected salary increases by budget

The preference to rely upon a total rewards program that differentiates the high performers from the broader employee population appears to have resulted in an increased number of organizations targeting base salary increases in a more strategic manner, ensuring that top performers receive greater differentiation in increases (e.g., two times the budgeted average for the rest of employees).

Medical, dental and retirement benefits remain a standard offering Even as health reform continues to take effect, 71% of the participating not-for-profit organizations reported that they continue to offer medical benefits, with an average employer share percentage of 81% of the total cost of the premium. This is despite the fact that more and more organizations, regardless of subsector and size, are investigating the sustainability of such a cost-sharing approach in light of Affordable Care Act provisions being implemented. Slightly fewer than six in 10 (58%) of participating organizations offer dental benefits, and the employer share percentage is typically approximately 74% of premiums. A retirement plan is offered by 63%, with these organizations generally contributing an average of 4.4% of salary.

Additionally, 55% offer life insurance or disability benefits, and 44% include vision coverage in their benefits. Part-time employees (those working fewer than 30 hours per week) are offered benefits by 32% of organizations.

Only 7% offer an executive supplemental deferred compensation arrangement to the leadership of the organization.

A compensation philosophy is embraced more by larger organizations Compensation philosophies serve as the blueprint for effective compensation design and governance. Formalized philosophies should document elements such as how peer groups are determined, where the organization is targeting pay relative to its peers, what items are included in total compensation and who is responsible for governing compensation decisions.

Compensation philosophies are far more common in the larger organizations that participated in the survey. The percentage of organizations that have a formal compensation policy:

Organizations with a formal comp policy
Nearly 50% of survey participants target the median of the market for their employees’ salaries. The percentage of job market targeted by respondent compensation philosophies:

Job market targeted by respondent comp philosophies

Variable pay plans — bonus and incentives — continue to rise in prevalence Some type of variable pay opportunity is offered by 42% of reporting organizations; this is an increase of 5% from last year.

Organizations offering a bonus/incentive plan

Within the not-for-profit sector in general, offering formal incentive plans and bonus opportunities is not a given, although the prevalence of the practice is higher at organizations in certain not-for-profit subsectors — in particular, professional trade associations, scientific society/research institutions, and health and public benefit/conservation.

Subsector and bonus plans

The prevalence of these plans also increases with organization size:

Bonus plans based on budget size

Of organizations offering bonuses, the level continues to be modest as compared to for-profit companies, although our experience with larger not-for-profits has shown much larger bonus opportunity levels than in small to midsize not-for-profit organizations.

C-suite compensation breakouts tell a different story Top executives (executive director or CEO) still receive the largest bonuses — at approximately 7.2% of base salary — while other senior executives in the C-suite receive an average bonus of 4.5%.

Average bonus/incentive

The prevalence and frequency of incentive plans beyond annual performance plans is far less common, with only 2% of participating organizations stating they offer a formal long-term incentive plan. The use of longer-term compensation vehicles — such as nonqualified deferred compensation programs or supplemental retirement programs — are considered more applicable for not-for-profit organizations.

“Discretionary bonuses,” or bonuses not linked to a formal incentive plan opportunity, remain the most commonly reported type of incentive pay. However, not-for-profits are looking to more effectively align compensation with organizational performance through the use of more formalized metrics.
Board compensation practice varies within the industry Compensating board members is a controversial topic. And while at first glance it does not appear to be a widespread phenomenon, less than 3% of survey participants reported they compensate board members for their services. A deeper dive by subsector reveals such information as 13% of professional associations compensating board members, which is well above the trend. The practice remains of interest to watchdog groups and regulators alike, and the levels of compensation do vary.

Board member compensation levels:
Subsector board member compensation
Budget category
Overall, we are seeing the majority of not-for-profits compensating their board members less than $5,000.

Information and regular review strengthen compensation planning Appropriateness, compliance, strength and effectiveness of total compensation require leaders’ regular review. Assuring these elements requires an informed lens on the comparable market and best practices, and alignment with mission, purpose and goals. Each element of your rewards program rates attention equal to, or more than, that dedicated to other strategic, financial and operational programs supporting your organization’s work.  

Legislation gives nonprofits new benefits, burdens
The sweeping $680 billion Protecting Americans from Tax Hikes Act of 2015 (PATH Act) makes permanent and enhances many tax benefits that help not-for-profits, but it also brought new restrictions and reporting requirements.
Read about it.
About the survey participants
The not-for-profit organizations participating in our survey included approximately 800 responses from a broad array of organizations, including education/cultural institutions (18%), health organizations (9%), human services (39%), professional/trade associations (11%), public benefit/conservation (13%), scientific society/research institution (2%), special interest/religion-related (4%) and other types of organizations (4%).

They range in size from a large annual operating budget (over $500 million) to small (under $1 million) and staff from numerous (over 2,000) to just a few (under 10).

Download the executive summary PDF.

Visit our ordering site for a copy of the full survey.<

You may also be interested in the 2014 compensation and benefits survey.