Navigating Job Classifications and Pay Ranges in Nonprofits

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Most small nonprofits don’t have a formal job classification system. They have a collection of job titles that evolved organically, salaries that were set based on whatever the budget allowed at hiring time, and a vague sense that some positions should pay more than others. The result is predictable: pay inequities, compression problems, FLSA violations, and staff who don’t understand how their compensation was determined or how it can grow.

Building a job classification system and pay ranges isn’t just an HR exercise. It’s how you create transparency, reduce bias, manage your budget, and retain good people. And you don’t need an HR department to do it. You need a clear framework and the discipline to use it.

This guide covers everything from building classification levels to creating salary bands to handling the messy reality of compression – with practical examples sized for small and mid-sized nonprofits.

What Is a Job Classification System?

A job classification system groups positions into levels based on their scope, complexity, responsibility, and required qualifications. Instead of every position being a standalone entity with an individually negotiated salary, positions are organized into a structure that makes compensation decisions consistent and explainable.

For a 20-person nonprofit, you might have 5-7 classification levels. For a 50-person organization, 7-9 levels. You don’t need 20 levels with sub-grades and step increases. Keep it simple enough that any staff member can look at the system and understand where they sit and what growth looks like.

Here’s what a typical small nonprofit classification system looks like:

Level	Title Examples	Characteristics
1	Administrative Assistant, Receptionist, Data Entry	Entry-level, routine tasks, close supervision, no direct reports
2	Program Assistant, Bookkeeper, Communications Assistant	Some independent judgment, specialized skills, may train others
3	Program Coordinator, Accountant, Marketing Specialist	Professional-level work, manages projects or small programs, limited supervision
4	Program Manager, Development Manager, Finance Manager	Manages staff or major programs, budget responsibility, significant independent judgment
5	Program Director, Development Director, Operations Director	Leads a department or major function, manages managers, strategic responsibility
6	Deputy Director, CFO, VP of Programs	Senior leadership, organization-wide responsibility, reports to ED
7	Executive Director, CEO	Chief executive, full organizational responsibility, reports to board

Your specific levels will differ, but the principle is the same: group positions by their actual scope and complexity, not by the person currently in the role.

Exempt vs. Non-Exempt: Getting FLSA Right

Before you build pay ranges, you need to get your Fair Labor Standards Act (FLSA) classifications right. This determines who gets overtime pay and who doesn’t – and getting it wrong exposes you to back-pay claims, penalties, and lawsuits.

The Basics

Non-exempt employees must be paid at least minimum wage for all hours worked and overtime (1.5x their regular rate) for hours exceeding 40 in a workweek. Most hourly employees are non-exempt.

Exempt employees are excluded from overtime requirements. To be exempt, an employee must meet all three of these tests:

1. Salary basis test: The employee is paid a predetermined, fixed salary that isn’t reduced based on quality or quantity of work
2. Salary level test: The salary meets the minimum threshold set by the Department of Labor. As of 2024, this is $684 per week ($35,568 annually), though proposed rules may increase this significantly – check current DOL guidance
3. Duties test: The employee’s primary duties meet the criteria for one of the exempt categories: executive, administrative, professional, computer employee, or outside sales

Common Nonprofit Misclassifications

Program Coordinators classified as exempt: This is the most common mistake I see in nonprofits. Just because someone has a professional-sounding title and earns a salary doesn’t make them exempt. If their primary duties are carrying out program activities (not managing them), they may be non-exempt regardless of title. The duties test requires that administrative exempt employees exercise independent judgment and discretion on matters of significance. Following established procedures to run a program usually doesn’t qualify.

Development Associates classified as exempt: An entry-level development staffer who processes gifts, maintains the database, and sends acknowledgment letters is performing routine work. They’re likely non-exempt even if they’re salaried.

Executive Assistants classified as exempt: Unless the EA is making independent decisions on matters of significance (not just scheduling and correspondence), they’re probably non-exempt.

The test is always about what the person actually does, not their title, not their salary, and not what’s convenient for the budget. If you have any doubt about a classification, consult an employment attorney. The cost of a one-hour consultation is nothing compared to a back-pay claim.

Building Pay Ranges

Once you have your classification levels and FLSA designations, you can build pay ranges for each level. A pay range has three key points:

• Minimum: The lowest salary for a position at this level. This is typically what you’d pay someone meeting the minimum qualifications with limited experience
• Midpoint: The target salary for a fully competent performer. This should generally align with the market median (50th percentile) based on your benchmarking data
• Maximum: The highest salary for this level. This is for exceptional performers with significant tenure and expertise. Beyond this point, the person needs to move to a higher classification level to earn more

Setting the Spread

The “spread” is the percentage difference between the minimum and maximum of a pay range. Common spreads by level:

• Entry-level positions (Levels 1-2): 30-40% spread. For example, if the midpoint is $40,000, the minimum might be $34,000 and the maximum $46,000
• Mid-level positions (Levels 3-4): 40-50% spread. More room for growth as roles have greater complexity and performance variation matters more
• Senior positions (Levels 5-6): 50-60% spread. Significant variation in experience and impact at this level justifies a wider range
• Executive (Level 7): 50-60% spread, though executive compensation is often handled separately with its own comparability analysis

A Practical Example

Let’s say you’ve done your benchmarking and found that the market median (50th percentile) for a Program Manager at comparable organizations in your area is $58,000. Here’s how you’d build the range:

• Midpoint: $58,000 (market median)
• Spread: 45% (appropriate for a mid-level position)
• Minimum: $58,000 / 1.225 = $47,347 (round to $47,500)
• Maximum: $58,000 x 1.225 = $71,050 (round to $71,000)
• Pay range: $47,500 – $58,000 – $71,000

The math: with a 45% spread, the minimum is approximately 82% of the midpoint, and the maximum is approximately 122% of the midpoint. You can use a simpler approach – just set the minimum at 80% of midpoint and maximum at 120% – and you’ll be close enough for most small nonprofits.

Building All Your Ranges

You don’t need to benchmark every single position to build a complete pay structure. Here’s the efficient approach:

1. Benchmark 2-3 positions per classification level – choose the most common roles or the ones with the most available market data
2. Set the midpoint for each level based on the average of your benchmarked positions at that level
3. Apply consistent spreads using the guidelines above
4. Check the overlap between adjacent levels. Some overlap is normal and desirable (a top performer at Level 3 might earn more than an entry-level person at Level 4). Typically, the minimum of the next level falls somewhere between the midpoint and maximum of the level below

For a detailed methodology on gathering the benchmarking data, see our guide on conducting a nonprofit compensation study.

Placing Employees Within Ranges

Once you have ranges, you need to decide where each current employee falls. This is where it gets real.

New hires with minimum qualifications: Start at or near the minimum. Resist the urge to start everyone at the midpoint – you need room for growth.

Experienced new hires: Place them based on their experience relative to the range. Someone with 5 years of directly relevant experience might start at 90-100% of midpoint.

Current employees below minimum: These need immediate attention. If your new pay structure shows that someone is being paid below the minimum for their level, that’s a market equity issue. Budget for adjustments to bring everyone to at least the minimum within the current fiscal year if possible, or within a defined timeline (no more than 12 months).

Current employees above maximum: This is trickier. You generally don’t cut someone’s pay. But you can freeze their salary (no increases until the range catches up) or, if they’re genuinely performing at a higher level, consider whether they should be reclassified to a higher level. Employees above their range maximum are often a sign that the classification is wrong or the range is outdated.

Handling Compression

Salary compression is one of the most corrosive problems in nonprofit compensation. It happens when new hires are brought in at salaries close to or exceeding what long-tenured employees in the same role earn. Your 8-year program manager is making $56,000, and you just hired a new one at $54,000 because that’s what the market demanded. The veteran finds out (they always find out) and is justifiably upset.

Compression typically results from:

• Market-rate hiring without range adjustments: The market moved, your ranges didn’t, so new hires come in at the top of the old range while incumbents are scattered throughout
• Flat or cost-of-living-only raises: If you only give 2-3% annual raises while the market moves 4-5%, your long-tenured employees fall further behind every year
• Inconsistent starting salaries: Without a formal structure, starting salaries are individually negotiated, leading to people doing the same work at very different pay levels

Fixing Compression

Step 1: Identify it. Map every employee’s salary against their pay range. Calculate their “compa-ratio” (actual salary divided by range midpoint). A compa-ratio of 1.0 means they’re at midpoint. Below 0.85 is a red flag. If you have two people in the same role with compa-ratios of 0.82 and 1.05, you have a compression problem.

Step 2: Quantify the cost. Calculate what it would cost to bring all compressed employees to an appropriate position in their range. For most small nonprofits, this number is smaller than expected – often $20,000 to $50,000 spread across 3-5 employees.

Step 3: Prioritize. If you can’t fix everything at once, start with the worst cases – the longest-tenured employees with the lowest compa-ratios. These are your highest flight risks and your most unfair situations.

Step 4: Build it into your annual budget. Allocate a portion of your annual salary increase budget specifically for equity adjustments, separate from performance or cost-of-living increases. Even setting aside 1% of total payroll for equity adjustments each year adds up over time.

When to Update Your Classification System

A classification system isn’t a build-it-and-forget-it project. Review and update in these situations:

• Annually: Review pay ranges against current market data and adjust midpoints. Even a 3% annual adjustment to ranges keeps you from falling behind
• When creating new positions: Slot new roles into existing classification levels before posting the position. This prevents ad hoc salary decisions
• When roles significantly change: If a Program Coordinator takes on supervisory duties and budget responsibility, they may need to be reclassified to a higher level. Don’t wait for them to ask – review when responsibilities change
• When the DOL updates FLSA thresholds: Changes to the salary threshold for exempt status can affect multiple positions. Review all exempt employees against the new threshold immediately
• Every 3-5 years: Do a comprehensive review of the entire structure. Are your levels still appropriate? Do you need to add or consolidate levels? Are your spreads working? Has your organization’s structure changed enough to warrant a redesign?

Communicating Your Pay Structure to Staff

A classification system only works if people understand it. Transparency about your pay structure – even if you don’t share individual salaries – builds trust and reduces the perception that compensation decisions are arbitrary.

At minimum, share with each employee:

• Their classification level
• The pay range for their level (minimum, midpoint, maximum)
• Where they currently fall in the range
• How they can progress within the range (performance, tenure, skill development)
• What it takes to move to the next classification level

Some organizations publish the full pay structure internally. Others share individual range information one-on-one. Either approach works, but some level of transparency is essential. If employees don’t know where they stand or how compensation decisions are made, they’ll assume the worst.

A Simple Template to Get Started

If you’re building a classification system from scratch, here’s a practical starting point for a 15-25 person nonprofit with a $1.5M-$3M budget:

Level 1 – Support Staff
Range: $32,000 – $40,000 – $48,000
FLSA: Non-exempt
Roles: Administrative Assistant, Office Coordinator, Data Entry Specialist

Level 2 – Specialist
Range: $38,000 – $47,500 – $57,000
FLSA: Typically non-exempt (evaluate each role)
Roles: Program Assistant, Bookkeeper, Communications Coordinator

Level 3 – Professional
Range: $45,000 – $56,000 – $67,000
FLSA: May be exempt (evaluate duties test carefully)
Roles: Program Coordinator, Accountant, Grant Writer, Marketing Specialist

Level 4 – Manager
Range: $54,000 – $67,500 – $81,000
FLSA: Typically exempt
Roles: Program Manager, Development Manager, Finance Manager

Level 5 – Director
Range: $65,000 – $82,000 – $99,000
FLSA: Exempt
Roles: Program Director, Development Director, Operations Director

Level 6 – Senior Leadership
Range: $80,000 – $100,000 – $120,000
FLSA: Exempt
Roles: Deputy Director, CFO, VP of Programs

Level 7 – Executive
Range: $95,000 – $125,000 – $155,000
FLSA: Exempt
Roles: Executive Director, CEO

Note: These ranges are illustrative and based on a mid-cost metro area in 2024. Your ranges must be based on your own benchmarking data for your geography, subsector, and budget size. For executive compensation specifically, follow the reasonable compensation standards and board approval process.

The Payoff

Building a job classification system takes effort upfront. For a small nonprofit doing it for the first time, expect 40-60 hours of work spread over 2-3 months. But the return on that investment is significant:

• Hiring becomes faster: When you know the pay range before you post the position, you eliminate weeks of salary negotiation and internal debate
• Retention improves: Staff who understand their pay structure and see a clear path forward are less likely to leave over compensation uncertainty
• Budget planning gets easier: Predictable salary ranges mean predictable labor costs. You can model raises, new positions, and growth without guessing
• Equity improves: A structured system reduces the bias and inconsistency that creep into ad hoc compensation decisions. People doing similar work at similar levels earn similar pay
• Compliance strengthens: Proper FLSA classifications, documented pay ranges, and systematic review processes all reduce your legal and regulatory risk

You don’t need a perfect system. You need a system. Start with what you have, build it out over time, and update it regularly. Your staff – and your mission – will be better for it.