2021 Nonprofit Compensation Report Takeaways
By Jenna Allen –https://blog.candid.org/post/key-takeaways-from-candids-2021-nonprofit-compensation-report/
The 21st edition of Candid’s annual Nonprofit Compensation Report examines significant employee pay based on 160,726 observations from 101,489 Forms 990 and 990-EZ filed with the IRS by 501(c) organizations in fiscal year 2019. It remains the most thorough nonprofit compensation study accessible, as it is the only large-scale examination of its sort based exclusively on data provided to the IRS.
To provide a preview of the extensive data covered in the 2021 report, we’re here providing important insights and main takeaways:
- Median executive compensation has grown steadily over the last five years.
The majority of the patterns seen in 2018 maintained in 2019, according to this year’s research, including consistent growth in median CEO remuneration. Year on year, this has climbed steadily from $106K in 2015 to $121K in 2019.
- Median compensation for CEOs decreased for all but the highest and lowest budget bands from 2018 to 2019.
CEO salary increased only at small businesses with budgets of $250K or less and large businesses with budgets of $50 million or more.
- There remains a pay gap in CEO compensation by gender. The pay gap is narrower for organizations with a smaller budget size.
There are still considerable differences in CEO salary between men and women, according to previous studies. At all sizes of companies, female CEOs had lower median salary than male CEOs. However, the wage gap between men and women is slowly narrowing, with pay gaps narrowing in all budget bands since 2005. Women also make up the majority of CEOs for smaller businesses with budgets of $2.5 million or less.
- Science and health organizations have the highest overall median executive compensation,while religious institutions continue to have the lowest.
Science and health organizations continue to have the highest total median CEO salary, at $196K, as they have for some time, while religious institutions ($65K), animal-related groups ($86K), and the arts ($92K) continue to have some of the lowest.
- 501(c)(3) organizations in the Northeast have higher median executive compensation compared to all other regions.
In comparison to other regions, the Northeast has the highest median executive income at $137K. With $174K in median executive compensation, the District of Columbia leads the way, followed by New York ($152K) and Massachusetts ($143K). It’s crucial to remember that geography is only one of several factors that contribute to pay disparities.
Why it matters
The IRS can punish both the executive(s) who got the overpayment and the board members who approved it if the IRS discovers that a nonprofit has overpaid its executives. Three steps can be taken by a nonprofit’s board of directors to avoid this outcome:
- Approving compensation in advance. The board must also ensure that no one who participates in the decision has a conflict of interest concerning the transaction.
- Basing its decision on comparability data obtained before the compensation is approved.
- Documenting the decision-making process at the time it approves the compensation.
Nonprofits that rely on donations must be ready to defend their remuneration methods in front of the general public. “For others, there may be a gap between what they consider reasonable as members of the public and what is allowed under tax law.” Having access to credible comparison data might mean the difference between keeping or losing public faith in your business.