3 ways Head Starts can respond to the final rule’s call for equitable compensation systems
The Head Start staff (formerly, Early Head Start and Head Start) compensation landscape is readying for transformation with the introduction of the August 2024 Final Rule on Supporting the Head Start Workforce and Consistent Quality Programming. The final rule outlines new and enhanced changes to the Head Start Program Performance Standards (HSPPS) in three main areas: workforce support, mental health and other quality improvements.
While the prior version of the HSPPS did not contain any requirements for staff wages or benefits, the final rule will require that, by August 1, 2031, programs with more than 200 funded slots comply with the following compensation changes. These additions aim to assist with retaining and attracting staff and making measurable progress toward pay parity with local or neighboring school district teachers, addressing long-standing issues of why nonprofits pay so little and how much can nonprofits pay employees.
- Establish or update a salary structure to promote competitive wages for all Head Start staff and consider responsibilities, qualifications, experience and schedule or hours worked when determining staff wages. This will help establish clear nonprofit salary ranges and bring more salary transparency to Head Start staff compensation.
- Annual salaries for Head Start educators must match those of preschool teachers in public school settings or achieve at least 90% of public school kindergarten teacher salaries when adjusted for responsibilities, qualifications, experience and schedule or hours worked. This aims to address pay disparities and work to ensure fair compensation for Head Start staff salaries.
- Ensure all Head Start staff receive pay that is at least sufficient to cover basic costs of living in their geographic area. Programs must pay at least the minimum wage and strive for a living wage.
- Align wages for comparable positions across Head Start preschool and Early Head Start programs, reflective of staff qualifications and experience. This promotes nonprofit pay equity within all Head Start organizations.
The final rule also mandates that programs offer employee benefits to staff by August 1, 2028. Specifically, programs with more than 200 funded slots must offer the following to full-time staff (+30 hours):
- Facilitate access to healthcare coverage staff.
- Provide paid leave (e.g., vacation or PTO and sick leave).
- Offer access to free or low-cost, short-term behavioral health services.
Additionally, programs must:
- Connect part-time staff with health insurance options in the marketplace.
- Facilitate access to Public Service Loan Forgiveness and child care subsidies for eligible staff.
- Provide staff an option to prioritize enrollment in Head Start for the eligible children of staff.
Programs must also assess their compensation program and employee benefits offerings every five years. This regular review of nonprofit compensation policies and practices will help ensure they remain fair and competitive over time.
While the directives are clear, many agencies are uncertain about how to implement such changes without federal funding, even if they have four to seven years to do so. Here are three recommendations to help your agency plan and prepare for these changes:
1. Pay equity
Obtain and monitor your local and neighboring school district salary schedules. Most can be found online by searching “salary schedules” and the district’s name.
Before incorporating the salary schedules for teaching positions in your next wage comparability study, don’t forget to convert annualized wages into hourly wages by understanding the public school teachers’ employment contracts, specifically, how many months/days they work in a year.
While two school districts may pay their first-year bachelor’s degree teachers $50,000 annually, their hourly rates may differ. For example, in a district where teachers work 1,850 hours per year, the equivalent hourly rate would be $27.03 per hour; 90% of that becomes $24.33 per hour. And in a district where teachers work 1,664 hours per year, the equivalent hourly rate would be $30.05 per hour and when adjusted for the 90% comparability rule, the hourly rate becomes $27.05.
To further address current market pressures and general talent shortages, use published wage and salary surveys to obtain your reputable insights. Also include other relevant industry and sector data, such as preschools and day cares, aligning with your agency characteristics to complement your nonprofit and public school district data. A nonprofit compensation report can provide helpful benchmarks.
Conducting regular pay equity analyses is important for helping to ensure fair nonprofit pay practices and identifying any wage disparities that need to be addressed. Nonprofits should strive for wage equity and transparency around nonprofit salaries.
2. Salary structure
The labor market is competitive and dynamic, making it critical to be proactive when planning minimum pay requirements and wage comparability in your salary structure.
Don’t wait five years to complete your next wage study and salary structure full cycle update. The market will continue to move, and wage growth will continue to increase, potentially causing your employee wages and compensation philosophy-stated practices to lag the market.
You should also continue to monitor the annual Executive Level II pay cap threshold, announced every January. For 2024, this amount is $221,900 annually. Use this to set your salary structure maximum(s) for any staff compensated using federal Head Start dollars. This is a key area of awareness for 5013c salary rules.
Similarly, set appropriate pay minimums (or pay floors) in your salary structure, inclusive of a living wage. There are multiple publicly available tools Head Start programs can use to incorporate sufficient wages to allow staff to provide for themselves and their families. The most widely used tool is the Living Wage Calculator developed by the Massachusetts Institute of Technology (MIT). The minimum wage is the absolute floor, but nonprofits should strive to pay a living wage.
Salary transparency, including disclosing nonprofit salary ranges, is becoming increasingly common and even required by pay transparency laws in some areas. Nonprofits should consider proactively sharing salary ranges in job postings and being transparent about their compensation practices. This can help build trust with employees and job seekers.
3. Employee benefits
Familiarize yourself with and adhere to existing federal, state and local laws. (Your jurisdiction may already require this compliance.)
Research and determine the most appropriate type of employee leave program to support your agency, such as vacation and sick time or paid time off. Additionally, consider HRIS integration capabilities and limitations.
Review your existing policy and procedures manual, in addition to your current benefit offerings, to determine if language adjustments should be made to mirror the final rule’s definition of full-time staff (i.e., +30 hours).
Conduct an analysis or engage your insurance broker or third-party administrator to determine the competitiveness of your employee benefit offerings for your local market and organization size. Robust benefits are an important part of nonprofit compensation and can help attract and retain nonprofit employees.
Partner with your local and neighboring school districts to understand their employee benefits. Consider statewide plans and, if needed, complete a FOIA request to obtain information for each school and district.
In addition to the benefits required by the Head Start rule, some nonprofits also offer additional perks and benefits to employees. For example, some nonprofits give bonuses based on performance or meeting certain goals. A well-designed nonprofit bonus structure can incentivize and reward high performance. However, nonprofits need to be aware of rules and limitations around how bonuses and other additional compensation are structured.
Nonprofits should also consider practices like salary disclosure and pay range disclosure in job postings to promote transparency. Some nonprofits are also exploring concepts like nonprofit equity — ways to give employees an ownership stake. However, there are rules and limitations around how equity and ownership can be structured in a nonprofit.
Overall, the new Head Start compensation rules will require significant changes for many Head Start programs. Agencies should start planning now to review their nonprofit pay practices and work to ensure they will be in compliance with salary and benefit requirements. Regularly monitoring compensation in the broader market, working to ensure pay equity, maintaining appropriate salary ranges and providing robust benefits will all be key.
Transforming compensation and benefits is an investment in the nonprofit workforce and the families and communities Head Start serves. With advance planning and a commitment to fair nonprofit compensation, Head Start programs can successfully navigate this transition to better support their dedicated staff.
How Wipfli LLP can help
Given the far-reaching impact of the final rule, it’s crucial that proactive planning steps are taken to prepare for the journey ahead.
Wipfli can help you proactively navigate these changes with data-driven foresight. Our industry-experienced team is ready to help you apply tailored solutions to meet your organizational needs and the market you operate within. Begin by downloading our wage comparability study RFP, or learn more about how we can support your nonprofit organization and staff by helping you prepare for the changes.
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