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blog no. 12: What is a Fair Salary?

In Joe Kroll’s ABCs of Tax-Exempt Status from the Craigslist Foundation Nonprofit Boot Camp he addresses a fair compensations for non-profit employees. I found it interesting and debatable because the IRS does not have specific guidelines for fair compensation. An excessive CEO salary for example falls under inerment and private benefits and could cause an organization to lose its tax exemption status. Earlier in the year we had a discussion about what is considered a fair salary for employees and we couldn’t come up with a concrete answer.  One opinion was that a similar job in the private sector should be paid similar salaries as those in the non profit sector. Others contributed that the salary should be enough to live “comfortably” which is very subjective as well. In the speech Mr. Kroll acknowledges the difficulty in deciding fair pay. When asked what is a fair salary he suggests hiring companies that specialize in compensation studies. These companies will then create a guideline for fair pay. In my opinion I think it is in the best interests of the civil society itself to provide competitive wages. Non profits are in competition with businesses and government. A great way to attract highly trained and skilled employees to better serve the civil society is through wage compensation. Civil society as a whole will benefit from competitive wages and better serve the less fortunate.

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5 Responses to “blog no. 12: What is a Fair Salary?”

  1. This was one part of the listening I thought was interesting as well. I found it odd that the government can come and audit you because your salaries were unfair, yet not have a guideline as to how they determine it. Based on what he is saying it is all speculation. Yes, he gave some examples, but most were just really obvious cases, like making 200,000 as a non profit and the president gets 150,000. But what happens when the organization seems to be unfair with salaries to one IRS person yet fair to another. You would just think there would be more of a regulation rather than people’s prerogatives.

    I do like your idea of competitive business though, to me a non-profit is a competitor fighting for your donations. In the same sense they should be hard workers competing for the best wage.

  2. I think that it would be best to compare salaries of those professionals who are not in the nonprofit sector and base salary on that. Keeping in mind that professsionals may be subject to earning a bonus, etc. for working exceptionally hard. I think at the end of the day this would be the fairest way to go about establishing salaries.

  3. I definitely think its a complex issue, but one that the IRS is not overly concerned with. There really is no way to codify a set of guidelines for executive pay because it is so dependent on the business environment. If the economy is booming rather than tanking, wages would have to be higher to encourage executives but if the economy was falling then wages could be lower because there would be more people looking for jobs. Additionally, In the podcast that I listened to, he talked about using a comparative scale. That the IRS would compare executive pay to other nonprofits of the same size and working in the same issue-area. If an executive is getting paid 5 times more than everyone else, there may be something worth looking into. I think the question is one that plagues the industry and is touchy for a lot of people. I don’t think that nonprofit executives should be paid the same wages as those who work in for-profit businesses, but I do think that they should be paid well, and their salaries should be commensurate with the budget of their organization.

  4. I do agree with your idea of having competitive wages. I actually just posted about this topic a minute ago. I think paying the person competitively will help increase productivity and in the long run it will benefit the non profit. It is a very interesting topic and i also like the idea of having a compensation specialist.

  5. Working for compensation is the only way to live in this country. If you don’t work, you don’t make money and you really can’t survive.

    With that being said, I don’t believe people with a giving heart should have to suffer because they want to help others. I think they should be compensated for their work as much so as anyone else, in any sector, doing the same thing they are doing.


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