Executive Service Corps Maine Association of Nonprofits Setting Effective & Ethical Compensation Levels

2 Presenters Len Cole, Esq Michael Daily, Executive Service Corps Brenda Peluso, Maine Association of Nonprofits

3 Agenda Introductions/What do we want to learn today? History of the Survey What we have learned over the years Overview of 2010 Survey Using the Survey Salary Administration Case Benchmarking Benefits Annual Budget Cycle - CFO for a day Designing Benefits Programs

4 Why? Retaining good employees Turnover can be disruptive and costly Being as fair and equitable as possible

5 History of the Survey Started in 1997 ESC joined MANP for the 1999 Survey ESC and NH Center for Nonprofits did 2005 NH Survey NH joined Maine in 2006 – Moved to Online Survey

6 What we have learned over the years Salaries are uniform, if not identical, throughout Maine and New Hampshire The Executive Director’s salary level is the major influence on senior staff salary levels Budget size is the most important influence on Executive Directors and Senior Staff salaries Statewide, regional and umbrella groups pay better Nonprofit salaries are high relative to for profit salaries, but low when qualifications are taken into account

7 What we have learned (Part 2) On average men make more than women, in part because men tend to head larger nonprofits Gender Equality has improved since 2003, although it slipped in 2010 We are doing better than for profits and better than nonprofits nationally on Gender Equality The average salaries are not that accurate, especially for data sets less than 30 – can be +- 10% Escalating group medical premiums crowd out raises and other benefits

8 Economic Conditions & Salary Survey Nonprofit Finance Fund Survey Wage and Benefit Survey in Northern New England

9 Where we are today 2009? What have you done to weather the recession? Develop a "worst-case scenario" contingency budget65% Engage more closely with your board59% Funder conversations to explain situation / use of currently restricted grants48% Freeze all hires and current salaries48% Use reserve funds43% Collaborate with another NPO to provide programs42% Reduce staff or salaries41% Reduce or eliminate programs39% Delay payments to vendors23% Speed up the collection of receivables22% Reduce staff hours (short weeks, furloughs, etc.)22% Reduce staff benefits21% Reduce or refinance occupancy costs18% Collaborate with another NPO to reduce administrative expenses13% Sell assets such as a building or securities 6% Merge with another organization 5% No change - business as usual 4% Nonprofit Finance Fund Survey - 3/09

10 Where are we today 2010? What have you done to weather the recession? Engage more closely with your board58% Collaborate with another NPO to provide programs47% Rely more on Volunteers43% Develop Contingency Budget39% Add/Expand programs37% Hold Conservations with Funders 22% Freeze all hires and current salaries21% Use reserve funds21% Collaborate with another NPO to reduce administrative expenses 19% Reduce or eliminate programs18% Speed up the collection of receivables17% Expand geographies served14% Reduce or refinance occupancy costs13% Reduce staff or salaries12% Nonprofit Finance Fund Survey - 3/10 New Hampshire

11 Other Key Points – From the Nonprofit Finance Fund Volatility of nonprofit financial performance has increased with every recession Nonprofits experience deficits during and after recessions – 5 year tail? 24% expect 2010 deficit vs. 32% actual in 2009 (NH) 61% of respondents have less that 3 months cash on hand (NH) Most NH Nonprofits who rely on state and federal funding expect more cuts in 2010

12 Lay-offs NH 2008 – 8% anticipating 2010 – 33% did in last 12 months 2010 – 15% anticipating one Maine 2008 – 10% anticipating 2010 – 38% did in last 12 months 2010 – 13% anticipating one

13 Economic Conditions to 2010 Unemployment in NH went from 3.6% to 7.7% to 5.9% Unemployment in Maine went from 4.9% to 8.3% to 8.1% Maine moved for 35 th to 30 th in Per Capita Personal Income NH moved from 9 th to 8 th in Per Capita Personal Income Inflation was about 1.2% or.6% a year

14 Wage & Benefit Survey Huge increase in participation! NHMaine

15 Salary Averages – Up! Index of 27 jobs in $/Hr NHME 2008$20.04$ $ %5.2%

16 Executive Directors’ Salaries 2008 NH 2010 NH 2008 Maine 2010 Maine Under 250K $47,091$47,840$46,301$43,638 $250K – $500K $61,422$62,962$61,838$54,408 $500K – $1M $66,422$71,635$74,506$72,613 $1M – $5M $87,173$95,680$88,130$91,582 $5M – $10 M $110,739$118,560$95,784$97,573 Over $10M $134,909$125,070$118,456$126,173

17 Executive Directors’ Pay Changes over 2 years Up 2.3% in Maine Up 4.9% in NH

18 Gender Differences – Executive Directors NH Under $1M 65% Female/35% Male NH Above $1M53% Female/47% Male Maine Under $1M60% Female/ 40% Male Maine Above $1M53% Female/47% Male However a larger portion of the Male Population is in the bigger nonprofits Correcting for Size NH Female ED’s make $.894 for every $1.00 that Males make Correcting for Size Maine Female ED’s make $.937 for every $1.00 that Males

19 Maine Gender Graph

20 Benefits are Reduced as a % of Salary 2008 NH 2010 NH 2008 Maine 2010 Maine Under 250K 12%7%11%6% $250K – $500K 16%12%13%12% $500K – $1M 17%16%20%17% $1M – $5M 17%16%22%20% $5M – $10 M 21%16%23%24% Over $10M 25%27%24%

21 Benefits Cuts - Summary NH Group Health offerings dropped from 83% to 75% of nonprofits Maine Group Health offerings dropped from 84% to 74% of nonprofits 25% of nonprofits do not offer Group Medical In NH the only benefit out of 22 that was found in a larger % of nonprofits was Retirement Counseling (5% to 6%) In Maine only three benefits out of 22 increased: Health Wellness (1(% to 20%) Child Care Assistance (4% to 6%) and Retirement Counseling (3% to 6%)

22 Conclusions NH faired better than Maine Large nonprofits did better than small nonprofits

23 Using the Survey - Wages Service providers, such as Case Workers, are similar across all organization sizes, while management, such as Program Directors, is paid more in larger organizations Service Providers – Take the average from W-4 For Management – Take the average from tables by Size W-6 to W–11 For Part Time – Go to W– 5, if not there, use 90 to 100% of Full Time Inflation Adjustment – If you are using next year (2%)

24 Examples Executive Director - $350,000 Budget Finance Director – $3,000,000 Budget Program Director - $1,500,000 Budget Director Care Worker - $500,000 Budget

25 How do I use the other data Region Mission Education

26 Case Using Comp Rate Definition: Compensation Ratio, Comp Ratio, or CR A Comp Ratio of 1.0 is the Average Salary for the job as shown by the survey. It is seen as the “fair market wage” A CR of.8 is 80% of the Average Salary, while a CR of 1.2 would be 120% of the Average Salary.

27 Comp Rate - Principals For most jobs a reasonable range is CR.8 to CR 1.2 In most cases CR.8 to CR 1.2 encompasses the least and most that an employer would expect to pay. For most jobs the starting salary should be CR.8 The salary scale should move up annually with the CPI. Salaries increase with experience and demonstrated performance. Consider a target CR of 1.1 to keep good employees.

28

29

30

31

32 What about jobs not in the survey? Guidestar – 990’s Other nonprofits or for profits Ads Salary.com Interpolate Other surveys – Museum Association

33 Benefits How broad are your benefits? Who pays for them – cost sharing?

34 Benchmarking Benefits Benefits My Nonprofit Group Health83%75% Group Health for Dependents 73%66% Jury Duty Leave66%61% Family Medical Leave58%57% Group Dental59%51% Pension Plan61%50% Group Life Insurance55%49% Maternity Leave48% Group Dental for Dependents 54%46%

35 Annual Budget Cycle – CFO for a Day What was the compensation budget for this year? Wages Benefits Payroll taxes Worker’s Comp Change in Staffing? New programs Layoffs What can we project for increases? Benefits Newer workers project at time in grade Longer term average CPI + 2%

36 Annual Budget Cycle What can we afford? Add or delete Benefits? Change Cost Sharing? How big is the raise pool? How do we allocate it?

37 Benefits Design Consider Mix Older workers Younger workers Young families High vs. Low wages Employee Surveys can be a big help

38 Len Cole, Esq. IRS Compliance

39 Executive Service Corps Contacts Michael Daily – ESC Northern New England (207) (603)