Maine Association of Nonprofits

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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 Directors 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 -
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• 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
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• Merge with another organization 5
• No change - business as usual 4

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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

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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 Salaries
2008 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 EDs make .894 for
  every 1.00 that Males make
• Correcting for Size Maine Female EDs make .937
  for every 1.00 that Males

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Maine Gender Graph
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Benefits are Reduced as a of Salary
2008 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 W11
• 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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What about jobs not in the survey?

• Guidestar 990s
• 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
• Workers 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
• [phone]
• [phone]
• Michael_at_Nonprofit-Consultants.org
• www.Nonprofit-Consultants.org