The nonprofit didn’t plan.
It had no policy for pay.
So folks never knew
What might happen one day.
And then it arrived!
A plan for the pay!
And not just a plan, a policy — hooray!
It was clear!
It was fair!
It was legal and true!
Staff, the board, and donors all said, “Yoo-hoo!”
March 2, 2024 (fast approaching!) will be the 115th birthday of Theodor Seuss Geisel (1904-Sept. 24, 1991) — the author and illustrator of The Cat in the Hat, Green Eggs and Ham, The Lorax, and Horton Hears a Who! and many, many more classic books for children.
And to quote Dr. Seuss, no matter your nonprofit’s size and mission, you need a compensation policy for all employees that is not a Grinchy “two sizes too small.”
Oh, the places you’ll go with good policy!
A clear and strong compensation policy isn’t just about wages and benefits, it signals to employees, donors, and the public that the care you put into fulfilling your nonprofit’s mission extends to the people who are integral to its success.
A compensation policy states your nonprofit’s values and philosophy when it comes to compensating its employees, lays out pay tiers and benefits, and how they are determined and approved. It describes potential conflicts of interest and how they can be avoided and includes comparability data information that shows how your nonprofit determines compensation based on similarly-situated organizations. Most importantly, it clarifies that compensation within the organization must be reasonable and in line with IRS requirements.
Your nonprofit’s compensation policy will help keep you on track when making hiring decisions and planning — and sticking to! — your budget.
And, remember, a good compensation policy doesn’t just tell employees where they are on a pay scale within the organization and the benefits that are available; it lays out for them in plain language how compensation decisions are made, who makes them, and what they can do to be successful in the organization.
Even if you’re comfortable with your nonprofit’s current compensation policy — when was the last time it was reviewed by the board and an attorney? Whether needing a revision to reflect a new labor law or fine-tuning to add clarity, a robust up-to-date compensation policy provides a fair and consistent framework for making sure employees are paid appropriately for their work. Delaying or blowing off a review of a compensation policy can have dire consequences for a nonprofit. There are a host of state and federal legal requirements when it comes to employees and hiring, from pay to working conditions to benefits. In addition, the IRS requires nonprofits follow specific rules when it comes to compensation in order to maintain their tax-exempt status.
A compensation policy, you will find
Is beneficial to all inclined.
You will like it on a boat.
You will like it with a goat.
You will like it in the rain.
You will like it on a train.
You will like it here or there
You will like it ANYWHERE!
If your organization is interested in drafting or revisiting its compensation policy, don’t hesitate to reach out to me today. My email is: firstname.lastname@example.org
About the Importance of a Compensation Policy (with apologies to Dr. Seuss)