Like many industries, our work in the nonprofit sector runs on the strengths, ingenuity, and dedication of our people. Many nonprofits spend more than 70% of their operating expenses on staff. Given the cost and impact of our workforce, compensation must be treated as part of a strategic imperative: aligning mission, talent, and sustainable operations for long-term success.
Whether you’re a nonprofit initiating a compensation strategy or about to refresh an existing one, here are four best practices to help guide your decisions.
1. Align with Your Mission and Financial Reality
Your compensation philosophy should not live in a vacuum; it must be inseparable from your organization’s strategy and mission. In the nonprofit context, this means recognizing how funding cycles, donor restrictions, grant revenue, or government contracts influence your salary bands and job levels. For instance, an advocacy organization during turbulent times may need nimble roles, less hierarchy, and more cross-functionality than a large nonprofit with well-established administrative structures.
Ask yourself:
- What kind of talent do we need now and in the next 3–5 years?
- How far out can we plan our funding, and how does that shape both our ability to pay staff and our commitment to our mission?
2. Analyze Your Turnover and Retention Patterns
Turnover often signals that something in your people system, including compensation, is misaligned. Although up-to-date, sector-specific turnover data for nonprofits is limited, Mercer’s 2025 U.S.
Turnover Survey reports average voluntary turnover at 13.0%, which is down from 17.3% in 2023 and 13.5% in 2024. However, turnover remains uneven across sectors, with nonprofits in human services, healthcare, and education continuing to experience higher turnover rates due to compensation compression, burnout, and perceptions about limited advancement opportunities.
For your organization:
- Track turnover by department, role, tenure, and demographic group.
- Use exit and stay interviews to track reasons for departure. Use data to determine: Are we losing staff because of compensation, lack of career path, inequitable pay practices, or other factors?
- Use data-driven insights to advance your compensation philosophy. Don’t just “raise salaries,” but ensure fairness, transparency, and alignment with mission.
3. Benchmark Jobs to the Market and Your Purpose
Job roles evolve, especially in a sector facing digital disruption, shifting donor behaviors, and changing service delivery models. Before you market-price a position, update the job description to reflect the incumbent’s responsibilities and capture what the role must deliver in the future.
That future-oriented lens is especially relevant for nonprofits adapting to new funding models or service modes in the foreseeable future.
Additional tips:
- When benchmarking, compare both the role criteria (skills, responsibilities, impact) and the job title. The same title might mean very different things at two different organizations.
- At Positively Partners, we triangulate data available from surveys and payroll systems with information scraped from job postings. Implementing this practice helps ensure salary insights accurately represent today’s market rates of pay at similar organizations.
- Compensation benchmarking reflects a moment in time. Refresh your analysis at least every two years, or more often if you’re in a high-turnover or rapidly evolving market sector.
For nonprofits, one nuance is worth emphasizing: Many organizations create unique combinations of responsibilities that may traditionally exist across multiple roles at a for-profit organization. It’s important not only to benchmark titles but also to consider the associated responsibilities and the level of discretion or seniority that comes with combining multiple functions.
4. Think Total Compensation and Communicate It Transparently
A strong benefits package is more than insurance and a retirement plan. The best benefits make your workforce feel valued, safe, and able to bring their best selves to the mission.
In nonprofits, the benefits discussion often tilts toward the notion that “we can’t afford market salaries.” Reframing benefits through total compensation and value-added support is a powerful lens. For nonprofits especially, total compensation often includes employer-paid benefits, paid time off, professional development, flexibility, remote work, recognition, non-monetary rewards, and career opportunities. If you view staff investment as part of the cost to advance your mission, you’ll want to bring transparency to that investment, too.
Consider:
- Use offer letters and onboarding to introduce total compensation, not just salary. Especially in competitive nonprofit recruitment, this early message matters.
- Survey your staff to ask: What benefits do you value? Is it support for general well-being, flexible scheduling, tuition reimbursement, career development, or something else?
- Develop a total compensation statement for each staff member that shows the value of their base pay plus the additional support. This helps staff see how your organization invests in them and frames conversations about fair pay.
- Be transparent and inclusive. Ensure that all staff, not just senior leaders, have access to meaningful benefits. Inclusive treatment across your organization is not optional.
Summary
In an era when nonprofit organizations face increasing service demands, tighter resources, and higher workforce expectations, getting your compensation strategy right is crucial. It’s part of your investment in people power and mission delivery.
For leaders who care about psychological safety, inclusive leadership, and the future of HR in the nonprofit sector, a well-crafted compensation strategy is as much about fairness and transparency as it is about market competitiveness. When people feel valued, seen, and invested in, they bring their full selves to the important work of social change.
