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How a pay equity analysis can benefit nonprofits

Feb 09, 2021

Attracting, retaining and motivating talent is priority one for all organizations in today’s competitive labor market.

Nonprofits have the advantage of being able to distinguish themselves as mission- and values-based organizations committed to serving others. This speaks to the hearts of your employees and their drive to make a difference. Even with this advantage, nonprofits still face challenges with one of the most emotional aspects of the employment relationship: compensation.

Fair, equitable and consistently administered pay practices are imperative. Removing the “mystery” of compensation structure and pay-related decisions enhances the confidence employees have in leadership.

How do you do that?

You start by ensuring your current compensation structure is competitive within your industry and the market(s) you serve.

This includes performing an evaluation of your pay practices relative to the market, building a competitive compensation structure, creating a strategy to address pay inequity, and establishing the foundation for continued pay equity moving forward or affirming that your pay practices are indeed equitable across the organization.

Having done these steps enables you to speak with confidence to your employees — which they will notice. You can also acknowledge the budgetary constraints you may have as a nonprofit. Employees want to know you are never taking your eye off of equitable compensation — particularly internal equity. Many already know you might not be able to compete with other for-profit organizations, but they want to be paid equitably within your organization.

What should your next steps be?

With the new presidential administration firmly in place, changes to the minimum wage are expected. Some of you are already experiencing these changes at the state level. Increases in the minimum wage create compression issues that need to be addressed, as they have a direct impact on pay equity.

Many organizations also have a requirement, whether from their funding source or within their policies and procedures, to evaluate compensation every 1-3 years.

As a best practice, organizations should consider working with an independent third party to conduct a pay equity analysis. An independent third party is able to bring an outside, objective view that is not influenced by the faces, names and backstories of employees. It builds credibility for the compensation system.

A pay equity analysis will help you determine whether your current compensation structure is competitive within your industry and markets and enable you to create a strategy to address its findings.

Wipfli has developed a free sample RFP to assist nonprofit organizations with securing a third party to help them analyze their organization’s compensation structure and practices. Feel free to use this pay equity RFP tool in its entirety or edit it to ensure it reflects your organization’s needs. Know that Wipfli is at the ready to assist.

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Author(s)

Julia A. Johnson
Director, Organizational Performance
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