There’s a common misconception that all nonprofit workers care so much about the nonprofit’s cause that they should be paid less than employees of for-profit companies; however, as with any business, nonprofit employees deserve fair and timely compensation. Paying nonprofit workers appropriately is crucial for the organization’s success, helping to attract, motivate, and retain qualified staff—especially those in essential roles.
Nonprofits make up a significant part of the U.S. economy. According to the National Council of Nonprofits, the sector employs over 12
million people, representing roughly 10% of the American workforce—making it the third-largest employer in the country. Yet, despite their size and impact, many nonprofits struggle with irregular cash flow, delayed reimbursements, and the challenge of paying staff appropriately, which can make it difficult to meet payroll obligations and retain staff. Smart nonprofit leaders, however, are finding solutions through understanding competitive compensation and tools like bank lines of credit for nonprofits, which help bridge funding gaps and ensure salaries are paid on time.
Summary
What Percentage of a Nonprofit’s Budget Should Go to Salaries?
Determining how much of your nonprofit’s budget should go toward salaries is key to maintaining both compliance and sustainability. While there’s no hard rule, financial best practices suggest that between 65% and 75% of a nonprofit’s expenses should go toward programs and personnel costs.
The IRS requires that compensation be “reasonable and not excessive,” meaning nonprofits should benchmark salaries using data from organizations of similar size, mission, and location. Nonprofit leaders should also consider regional cost of living, program complexity, and state minimum wage requirements when setting pay levels.
Well-compensated teams perform better and stay longer—reducing turnover and training costs. In fact, Nonprofit HR’s 2024 Talent Retention Study found that 52% of nonprofit employees leave due to low compensation, making fair pay a critical retention tool.
How to Determine What Your Staff Should be Paid
Determining what is a fair compensation is challenging but if you spend just a little bit of time, it isn’t difficult to determine. Benchmarking nonprofit salaries is essential both for compliance (IRS “reasonable compensation” rules) and for attracting and retaining qualified staff. Here’s where you can find reliable, up-to-date salary benchmarks for nonprofit employees:
The U.S. Bureau of Labor Statistics (BLS)
Website: bls.gov
The BLS provides detailed occupational wage data across industries, including nonprofits. You can search by job title, region, and metro area.
Great for: National or regional salary comparisons for roles like finance directors, development officers, or program managers.
The NonProfit Times Salary and Benefits Reports
Website: thenonprofittimes.com
Publishes one of the most recognized annual salary surveys specifically for nonprofit organizations. Includes compensation ranges by job type, organization size, and geographic location.
Great for: Benchmarking executive director salaries, fundraising, and program management salaries.
3. Charity Navigator – CEO Compensation Study
Website: charitynavigator.org
Produces a yearly CEO Compensation Report that breaks down average pay by organization size, mission area, and region.
Great for: Understanding executive compensation standards and ensuring compliance with “reasonable pay” rules.
4. Nonprofit HR’s Annual Talent Management and Retention Reports
Website: nonprofithr.com
Offers annual insights into salary trends, benefits, and workforce satisfaction within the nonprofit sector.
Great for: HR professionals aligning salaries with national nonprofit trends.
5. Guidestar (now part of Candid)
Website: candid.org
Allows you to search Form 990 filings, which disclose compensation for key executives at nonprofits. You can compare salaries by mission type and budget size.
Great for: Real-world comparisons within your niche (education, healthcare, human services, etc.).
6. Industry or Mission-Specific Associations
Examples:
Independent Sector (broad nonprofit trends)
National Council of Nonprofits
State nonprofit associations (e.g., NYCON in New York, MANP in Maine)
Many offer regional salary reports for members.
Tip For Determining Nonprofit Compensation
Combine three data points when setting compensation:
External benchmarks (like the sources above)
Internal equity (fairness across your organization)
Cost of living (use regional cost indices like MIT’s Living Wage Calculator)
Why Your Nonprofit is Losing Staff
Employee turnover in nonprofits is higher than in most other sectors — around 20% annually, according to Nonprofit HR’s 2024 Talent Retention Report — and most of those departures are preventable. Below is a clear, step-by-step guide to help you diagnose and address the root causes.
Step 1: Analyze Your Turnover Data
Start by gathering objective data to understand the scope and nature of your turnover.
Ask:
What is your annual turnover rate?
Are departures concentrated in specific teams or job levels?
Are people leaving voluntarily or involuntarily?
How long are employees staying before they leave?
Use tools like your payroll system or HR software to calculate patterns. If, for instance, employees consistently leave within the first 12 months, that may indicate problems with onboarding or unrealistic job expectations.
Step 2: Conduct Exit Interviews (and Take Them Seriously)
Exit interviews are your best window into the employee experience. Ask departing staff why they’re leaving — and look for trends over time.
Common reasons in nonprofits include:
Low compensation or limited benefits
Lack of career advancement or unclear growth paths
Work overload due to understaffing or funding constraints
Burnout from mission-driven pressure
Toxic leadership or poor communication
Be sure to conduct these interviews with an HR professional or board member (not a direct supervisor) to ensure honest feedback.
Step 3: Compare with Sector Benchmarks
Look at turnover benchmarks for nonprofits of similar size or mission. For example, turnover tends to be higher in social services and arts organizations than in education or healthcare nonprofits.
If your rate is significantly above industry norms, that’s a red flag that your nonprofit internal culture or management practices need improvement.
Step 4: Survey Current Employees Regularly
Don’t wait until people leave to find out they’re unhappy. Conduct anonymous employee engagement surveys at least once a year to measure:
Job satisfaction
Confidence in leadership
Workload balance
Training and growth opportunities
Communication and trust
Compare results year over year. Declining engagement scores usually foreshadow resignations.
Step 5: Examine Your Culture and Leadership
Nonprofit staff are often deeply committed to the mission — but that passion can be undermined by weak management or poor communication.
Ask yourself:
Do leaders listen and act on feedback?
Are workloads sustainable?
Do employees feel valued and respected?
If not, leadership coaching or management training may be needed.
Step 6: Evaluate Compensation and Benefits
Low pay remains the top driver of nonprofit turnover. Use salary benchmarks (from sources like The NonProfit Times, Charity Navigator, or Candid) to ensure your pay is competitive for your region and mission type.
If you can’t raise salaries immediately, consider:
More flexible schedules
Remote or hybrid options
Extra paid time off
Professional development stipends
These low-cost benefits can dramatically improve retention.
Step 7: Strengthen Financial Stability
Inconsistent cash flow or delayed payroll can erode staff trust. Nonprofits that use a line of credit or maintain a cash reserve are better equipped to pay employees on time and prevent turnover tied to financial stress.
Final Thought
Retention isn’t just about money — it’s about respect, stability, and opportunity. When nonprofit leaders listen to their people, benchmark fairly, and invest in better management practices, turnover drops and mission impact grows.
When Are Nonprofit Employee Salaries Due?
Nonprofits, like for-profit companies, must adhere to the Fair Labor Standards Act (FLSA), which mandates regular, timely payment to employees. Depending on the organization’s payroll structure, this may mean weekly, biweekly, semimonthly, or monthly pay cycles.
Still, inconsistent cash flow often forces nonprofits to delay payroll. To avoid this, many organizations maintain a cash reserve or line of credit to cover salaries when funding is delayed. These strategies provide financial stability and protect staff morale—two essential components for long-term mission success.
How Do Nonprofit Founders and CEOs Get Paid?
It’s perfectly acceptable for nonprofit founders and CEOs to earn salaries as long as their compensation is deemed reasonable. Founders are paid through the organization’s operating budget, just like other employees, and their pay should reflect the market rate for their responsibilities and experience.
Executive compensation is often scrutinized by boards and donors, but fair pay for leadership ensures the organization is managed effectively and sustainably. According to Charity Navigator’s 2024 CEO Compensation Report, the median nonprofit CEO salary is $150,000 for organizations with budgets between $1 million and $5 million.
What to Do if Your Nonprofit Can’t Meet Payroll
When fundraising or grant cycles slow down, nonprofit leaders often face difficult decisions. However, rather than resorting to layoffs or missed pay periods, a nonprofit line of credit can serve as a flexible safety net. This revolving credit allows organizations to borrow only what they need, when they need it, and repay it quickly once funds are available.
Providers like Financing Solutions offer specialized nonprofit lines of credit designed to handle cash flow disruptions, payroll delays, and emergency expenses. With no collateral, no personal guarantee, and a fast two-minute application process, nonprofits can access funding when it matters most.
Final Thoughts on Nonprofit Compensation
Fair compensation isn’t just an ethical responsibility—it’s a strategic one. Nonprofits that pay competitively are more likely to attract experienced professionals, reduce turnover, and achieve greater mission impact. While cash flow challenges will always exist, financial tools like a nonprofit line of credit and sound budgeting practices can ensure payroll stability.
At Financing Solutions, we understand the financial realities nonprofits face. Our 501(c)(3) line of credit provides affordable, flexible financing that keeps your organization moving forward—so you can focus on what matters most: making a difference.
