Maine Association of Nonprofits

1. 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 budget 65% Engage more closely with your board 59% Funder conversations to explain situation / use of currently restricted grants 48% Freeze all hires and current salaries 48% Use reserve funds 43% Collaborate with another NPO to provide programs 42% Reduce staff or salaries 41% Reduce or eliminate programs 39% Delay payments to vendors 23% Speed up the collection of receivables 22% Reduce staff hours (short weeks, furloughs, etc.) 22% Reduce staff benefits 21% Reduce or refinance occupancy costs 18% Collaborate with another NPO to reduce administrative expenses 13% 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 board 58% Collaborate with another NPO to provide programs 47% Rely more on Volunteers 43% Develop Contingency Budget 39% Add/Expand programs 37% Hold Conservations with Funders 22% Freeze all hires and current salaries 21% Use reserve funds 21% Collaborate with another NPO to reduce administrative expenses 19% Reduce or eliminate programs 18% Speed up the collection of receivables 17% Expand geographies served 14% Reduce or refinance occupancy costs 13% Reduce staff or salaries 12% 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 - 2008 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 35th to 30th in Per Capita Personal Income • NH moved from 9th to 8th in Per Capita Personal Income • Inflation was about 1.2% or .6% a year

14. Wage & Benefit Survey • Huge increase in participation!

15. Salary Averages – Up! • Index of 27 jobs in $/Hr

16. Executive Directors’ Salaries

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 $1M 53% Female/47% Male • Maine Under $1M 60% Female/ 40% Male • Maine Above $1M 53% 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

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.

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

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) 641-2300 • (603) 362-9300 • Michael@Nonprofit-Consultants.org • www.Nonprofit-Consultants.org