Nonprofit Salary Benchmarking: Why Guessing Costs You Talent

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Every nonprofit leader has had this moment: your best program director walks into your office, says they’ve been offered $15,000 more at another organization, and asks if you can match it. You scramble through your budget, realize you have no idea what market rate actually is for that role, and either lose a great employee or panic-approve a raise you can’t sustain.

This happens because most nonprofits don’t benchmark salaries. They guess. They pay what they can afford. They base raises on what feels right. And then they wonder why turnover is killing their programs.

Salary benchmarking isn’t a luxury for large organizations with HR departments. It’s a survival skill for every nonprofit that wants to keep good people and make smart compensation decisions. Here’s how to do it right.

The Real Cost of Underpaying (It’s Not What You Think)

Nonprofits love to talk about doing more with less. But when it comes to staff compensation, “less” often costs you more in the long run. Let me show you the math.

The average cost of replacing a mid-level nonprofit employee is 50% to 75% of their annual salary. For a program director making $60,000, that’s $30,000 to $45,000 when you factor in:

• Recruiting costs: Job postings, screening time, interview hours – figure $2,000 to $5,000 in direct costs and staff time
• Onboarding and training: New employees take 3 to 6 months to reach full productivity. During that time, you’re paying full salary for partial output
• Lost relationships: That program director had relationships with funders, partners, and clients that walk out the door with them
• Institutional knowledge: The grant reporting quirks, the donor preferences, the community history – none of that transfers in a two-week notice period
• Team impact: When one person leaves because of pay, everyone else starts wondering if they’re underpaid too

Now multiply that by the number of people you lose each year. If a $2M nonprofit with 20 employees has 25% annual turnover (which is common in the sector), that’s 5 departures per year. At $30,000 per departure, you’re spending $150,000 annually on turnover. That’s 7.5% of your budget going up in smoke.

What if you’d invested $50,000 in market-rate adjustments and kept three of those five people? You’d have saved $40,000, kept experienced staff, and maintained program quality. Benchmarking isn’t a cost – it’s an investment with a measurable return.

Where to Find Nonprofit Salary Data

Good benchmarking requires good data. Here are the sources that actually work for nonprofits, ranked by usefulness.

Form 990 Data (Free and Specific)

Every 501(c)(3) that files a Form 990 must report compensation for its highest-paid employees. This data is public. You can access it through ProPublica’s Nonprofit Explorer, Candid (GuideStar), or tools like ExemptPay that aggregate millions of 990 records for easy searching.

The advantage of 990 data: it’s real compensation from real organizations, reported to the IRS. No self-reporting bias, no survey methodology questions. The disadvantage: it only covers the highest-paid people (typically the top 5-20 employees), and the data is 1-2 years old by the time it’s available. For executive-level positions, 990 data is your best friend. For mid-level and entry-level roles, you’ll need other sources.

When you use 990 data, make sure you’re looking at total compensation reported on the 990, not just the base compensation column. The 990 breaks out base compensation, bonus/incentive pay, and other reportable compensation – you want the full picture.

Nonprofit Salary Surveys

Several organizations publish annual or biennial salary surveys specifically for nonprofits:

• Nonprofit HR’s Compensation Survey: Comprehensive data broken down by budget size, geography, and subsector. Not free, but worth the investment if you’re doing a thorough benchmarking exercise
• State and regional nonprofit association surveys: Many state nonprofit associations conduct salary surveys for their members. These are especially valuable because they capture regional market data. Check with your state association
• NTEN Technology Staffing and Compensation Survey: If you have technology-focused roles, this is the gold standard
• Council of Nonprofits: Maintains a directory of state-level surveys and resources

Bureau of Labor Statistics (BLS)

The BLS Occupational Employment and Wage Statistics (OEWS) program provides wage data by occupation and metropolitan area. It’s free, current, and covers every job category. The catch: it includes all employers, not just nonprofits. Use it as a reference point, but know that corporate salaries for similar titles are often 10-20% higher than nonprofit salaries.

Job Posting Analysis

Increasingly, job postings include salary ranges (and some states now require it by law). Scanning current job postings for similar roles in your region gives you real-time market data. It’s not systematic, but it’s current and it tells you what your competitors are actually offering right now.

How to Compare Apples to Apples

Raw salary numbers are meaningless without context. A nonprofit ED making $120,000 could be dramatically underpaid or dramatically overpaid depending on several factors. Here’s how to make valid comparisons.

Budget Size Matters Most

Budget size is the single strongest predictor of nonprofit executive compensation. An ED running a $500,000 organization is doing a fundamentally different job than one running a $5 million organization. The responsibilities, complexity, staff size, and stakeholder expectations scale with budget.

When benchmarking, compare within a budget range. If your organization has a $2 million budget, look at organizations in the $1 million to $4 million range. Going narrower is even better if you can find enough data points.

Geography Adjusts Everything

A development director in New York City needs $85,000 to have the same standard of living as one making $55,000 in Memphis. If you’re in a high-cost area, your salaries need to reflect that – or your people will leave for organizations (or sectors) that pay enough to live on.

Use geographic cost-of-living adjusters when comparing data from different regions. The BLS provides regional wage data, and cost-of-living calculators are freely available online.

Role Scope, Not Just Title

Titles in the nonprofit world are wildly inconsistent. A “Program Manager” at one organization might oversee a $50,000 budget and two part-time staff. At another, that same title could mean managing $500,000 and twelve direct reports. Don’t match on title alone – match on actual job scope.

When pulling comparables, look at:

• Number of direct reports
• Budget managed
• Revenue responsibility (for development roles)
• Program scope and complexity
• Required qualifications (advanced degrees, certifications, licensure)

Subsector Differences

Healthcare nonprofits pay differently than arts organizations. Education nonprofits pay differently than advocacy groups. Human services organizations often pay the least. When benchmarking, try to compare within your subsector. A food bank ED’s salary should be compared to other food bank or human services EDs, not to hospital CEOs.

Building a Defensible Compensation Philosophy

Benchmarking gives you data. A compensation philosophy tells you what to do with it. Every nonprofit should have a written compensation philosophy that answers these questions:

Where do we aim in the market? Most nonprofits target somewhere between the 25th and 75th percentile of comparable organizations. Targeting the 50th percentile (median) is a common and defensible approach. If you’re in a competitive market or need specialized skills, targeting the 60th or 75th percentile might be necessary. If you’re in a low-cost area with a strong mission draw, the 40th percentile might be sustainable. Pick a target and write it down.

How do we balance internal equity with market rates? Sometimes the market rate for a new development director is higher than what your current (and more experienced) program directors make. This is called compression, and it creates real morale problems. Your philosophy should address how you’ll handle it. For more on structuring pay grades to manage this, see our guide on job classifications and pay ranges.

What do we include in total compensation? If you offer generous benefits – a strong retirement match, fully paid health insurance, flexible schedules, remote work – that has real value. Your philosophy should acknowledge this. Some organizations explicitly say “we target the 40th percentile on base salary but the 60th percentile on total compensation.” That’s honest and defensible.

How often do we review? Annual salary reviews should be standard. Full benchmarking exercises every 2-3 years, with annual adjustments for cost-of-living. Document this cadence in your philosophy.

Putting It Into Practice

Here’s a practical approach to benchmarking that works for small and mid-sized nonprofits without an HR department:

Step 1: List every position. Create a spreadsheet with every role, current salary, and a brief description of responsibilities.

Step 2: Gather data for key roles. You don’t need to benchmark every position with equal rigor. Focus first on leadership, hard-to-fill roles, and any position where you’ve experienced turnover. Pull data from at least two sources for each role.

Step 3: Calculate your position. For each benchmarked role, determine where your current salary falls relative to the market. Are you at the 25th percentile? The 60th? Below the minimum? This gives you a clear picture of where you stand.

Step 4: Identify the gaps. Where are you significantly below market? Those are your retention risks. Where are you significantly above? Those might represent historical anomalies worth understanding (long tenure, past budget situations).

Step 5: Build a plan. You probably can’t fix everything in one year. Prioritize the biggest gaps and the highest-risk positions. Create a multi-year plan to bring salaries into alignment with your compensation philosophy.

Step 6: Document and share. Write up your findings and present them to the board. For executive compensation specifically, this documentation is part of the rebuttable presumption process the IRS expects. But even for non-executive roles, having documented benchmarking data protects you and demonstrates good stewardship.

If you want a more detailed walkthrough of the data-gathering process, our guide on conducting a nonprofit compensation study without hiring a consultant covers the methodology step by step.

When to Update Your Benchmarking

Don’t benchmark once and file it away. Markets move. Your organization changes. Here’s when you should refresh your data:

• Annually: At minimum, apply a cost-of-living adjustment based on CPI data. This isn’t benchmarking – it’s just keeping up with inflation
• Every 2-3 years: Do a full benchmarking exercise with fresh data from multiple sources
• When hiring: Always benchmark before making an offer for a new or vacated position
• After significant organizational change: If your budget grows 50%, you restructure, or you take on major new programs, your compensation structure needs to be revisited
• When you’re losing people: If turnover spikes in a specific department or role, benchmark immediately. Don’t wait for the next scheduled review

The Conversation With Your Board

Many EDs and operations managers are afraid to bring benchmarking data to their boards because they think the board will see it as a request for more money. Reframe it. Benchmarking isn’t about spending more – it’s about spending wisely. Present it as a risk management conversation.

“Our program director is paid at the 15th percentile for comparable roles in our region. The cost of replacing them if they leave is approximately $35,000. Bringing their salary to the 50th percentile would cost $8,000 per year. The math favors the raise.”

Boards respond to data, risk analysis, and clear recommendations. Give them all three.

Stop Guessing

The nonprofit sector loses talented people every day because organizations make compensation decisions based on gut feeling instead of data. You don’t need a big budget or an HR department to benchmark effectively. You need good data sources, an understanding of what makes a valid comparison, and the discipline to actually use the data you gather.

Your people are your mission delivery system. Pay them fairly, document your decisions, and stop losing your best staff to organizations that did the benchmarking work you skipped.