A competitive compensation strategy is essential for attracting and retaining top talent. For nonprofit organizations, establishing fair and motivating pay structures is crucial for mission success. However, navigating compensation can be complex, especially with evolving regulations.
Under the One Big Beautiful Bill (OBBB), for example, certain tax-exempt organizations face a 21% excise tax on compensation over $1 million for their highest-paid employees. This change particularly impacts large nonprofits competing with for-profit entities for executive talent.
But even if your nonprofit doesn’t pay anyone close to $1 million, the One Big Beautiful Bill (OBBB) still matters to you. The new law expands compensation reporting requirements and raises the bar for transparency across the nonprofit sector.
Evaluating (and potentially restructuring) packages, documenting decisions, and implementing clear policies will be key to managing costs and maintaining your nonprofit’s competitive edge, whether your organization is affected by an excise tax or not.
Read on to understand what a strategic compensation study is; how it can empower your organization to build a fair, competitive, and compliant pay structure; and what you should expect from compensation study.
What Is a Compensation Study?
A compensation study is a comprehensive review of your organization’s pay practices. It begins with an evaluation of your compensation philosophy and compares your roles to the external market.
A thorough study provides insight into whether your compensation is fair and competitive based on factors like your organization’s size, industry, geographic location, and the specific education and experience required for each position.
By analyzing this and other data, a compensation study helps you develop a structured and equitable pay framework. This process empowers your organization to make informed decisions that align with both your mission and budget, ensuring you can attract and motivate the talent needed to drive your initiatives forward.
Benefits of a Compensation Study
Investing in a comprehensive compensation analysis offers numerous advantages that support your organization’s long-term stability and growth. Key benefits include:
- Attract Top Talent: A competitive compensation package is crucial for drawing in the skilled professionals your organization needs.
- Accurately Forecast & Budget Labor Costs: Gain clarity on your spending to plan your financial future with confidence.
- Standardize Compensation Practices: Establish consistent and transparent pay policies across your organization.
- Promote Internal Equity: Ensure your compensation structure is fair and unbiased, fostering trust and morale among staff.
- Increase Job Market Competitiveness: Position your nonprofit as an employer of choice within your sector.
- Drive Productivity: Motivate employees by rewarding their contributions and demonstrating their value.
- Ensure Compliance: Adhere to fair labor standards and navigate complex tax regulations with confidence.
What Should a Compensation Study Include?
A strategic compensation study should look beyond base salaries to provide a holistic view of your total rewards package. A quality third-party analysis should evaluate all components that contribute to employee compensation and satisfaction.
Salaries are just the starting point. To create a truly competitive package, the study should also assess:
- Bonuses and sales commission plans
- Paid leave (vacation, sick, PTO, personal days)
- Insurance and retirement plans
- Stock options and equity (if applicable)
By evaluating these elements, you gain a complete picture of how your offerings compare to the market. This allows you to build a comprehensive and appealing rewards program that supports both recruitment and retention.
Empower Your Organization’s Future
A strategic compensation study provides the insights needed to build a competitive and equitable pay structure that aligns with your organizational goals and helps you attract, retain, and motivate the talent essential to your mission’s success. By taking a proactive approach to compensation, you can empower your team and strengthen your organization’s impact for years to come.
Interested in learning more about Rehmann’s compensation study services? Contact our HR Solutions team for more information or to schedule a consultation.