Nonprofits operate with a mission-driven focus, often working tirelessly to improve communities, support causes, or provide services. Like any other organization, they need to pay their employees to keep operations running smoothly. So, how do nonprofits pay employees?
While many nonprofits rely on volunteers and donations, they also hire full-time or part-time staff. Compensation for these employees typically comes from donations, grants, and other fundraising efforts.
Unlike for-profit companies, nonprofit organizations prioritize using their resources to further their mission. However, they must still offer competitive salaries to attract and retain skilled staff.
Balancing mission-driven goals with employee compensation is critical to making sure nonprofits fairly pay their employees while maintaining financial sustainability.
Before determining how nonprofits pay employees, it’s important to know where their funding comes from. Nonprofits draw from various revenue streams that help them fulfill their mission and compensate staff. These sources include:
Donations and grants: Nonprofits receive individual contributions from foundations or corporations. These funds can be unrestricted or allocated for specific purposes, including employee salaries.
Fundraising activities: Many nonprofits hold fundraising events or campaigns to generate additional revenue. Funds raised from these events often help support the organization's operational costs, including compensation.
Government funding and contracts: Some nonprofits receive government contracts or grants to provide essential services. This funding can be used to pay employees working on those specific programs.
Program service revenue: Nonprofits can also earn income from fees for services or products related to their mission. For example, museums may charge for admission, and thrift stores can sell donated items to support their cause. This additional income helps fund their mission and pay their staff.
These various revenue streams let nonprofits retain their paid staff, including executive directors and other key employees, to continue their important work.
Nonprofits have to find the right balance between complying with regulations and paying their staff a fair wage. Paying salaries that are too high attracts scrutiny from the IRS and leads to legal complications, while offering too little makes it difficult to attract and retain skilled employees.
By adhering to IRS guidelines and industry standards, nonprofits can sustain their mission and operate transparently without risking penalties or loss of funding.
Like for-profit companies, how nonprofits pay employees can depend on their size, staff roles, and business location.
By carefully managing their budget and staying informed about the job market, nonprofits can pay employees competitively while maximizing their resources.
Nonprofit employees' pay depends on the organization’s size and budget and may include various benefits and bonuses. Here’s a look at the typical compensation at a nonprofit:
How nonprofits pay their employees often comes down to balancing their resources with offering a fair and competitive package. Whether through salary, benefits, or unique perks, nonprofits find ways to attract and retain the talent they need to keep their mission moving forward.
Nonprofits face attracting top talent while competing with higher private sector salaries. Many conduct salary surveys or market research to remain competitive and stay informed about industry standards.
For example, according to the Bureau of Labor Statistics, nonprofit workers earn about $4.67 less per hour (including the cost of benefits) than those in the private sector. By benchmarking against similar organizations in the nonprofit and private sectors, they can set appropriate pay levels for various roles.
The Board of Directors often reviews and approves compensation, particularly for executive compensation, promoting transparency. This openness builds trust with employees and donors, helping nonprofits maintain a dedicated workforce and strengthening their credibility with stakeholders.
Looking for an easier way to manage employee compensation at your nonprofit? ThriftCart, an all-in-one point of sale (POS) software, offers simple, practical tools to make the process easier. Here’s how the platform helps you with employee pay:
ThriftCart makes it easier for nonprofits to manage employees while improving overall operations. It cuts down on administrative work, allowing more time and resources to allocate toward developing programs and furthering your mission. Added efficiency helps nonprofits stay focused on their goals, creating a better environment for both the organization and its paid employees and volunteers.
Nonprofits handle various responsibilities, from managing employee compensation to tracking donations. So, how do nonprofits pay employees fairly? Integrated software helps them meet budget limits while offering competitive salaries and hourly wages.
ThriftCart makes processing payroll, organizing donation records, and overseeing staff schedules easier, helping nonprofits stay on top of their financial and operational tasks.
With features like automatic tax reporting, real-time donation tracking, and integrated time clocks for staff, ThriftCart automates payroll processing, donation tracking, and staff management, helping nonprofits run their business better.
Book a demo today to see how ThriftCart POS can simplify your nonprofit’s employee payroll, track donations, and handle your nonprofit’s day-to-day needs.