Why Nonprofit Doesn’t Have to Mean No Employee Benefits

Nonprofit managers have a long list of jobs to do. You have clients to serve, administrative tasks to perform, and funds to raise. For all these tasks, you need talented workers who can devote time and attention to your agency.

Perhaps you’ve heard that nonprofits can operate solely on the efforts of good-willed volunteers with a passion for your cause. But for most nonprofits, this is not the case.

If you want your organization to provide value to your community, you’ll need skilled and experienced workers– and those usually come at a cost. Nonprofits must recognize that you are competing with for-profit businesses for talent. Experienced professionals have the option to take jobs in the private sector too. And the pay might be better there. A great compensation package could make a huge difference.

Nonprofit salaries and compensation

So how do we define a good compensation package? Let’s start with salary. At the least, all nonprofits must pay their employees the state or federal minimum wage. To maintain your tax-exempt status, the upper end of your pay scale must be “reasonable” and “not excessive.”  

That should help you determine the upper and lower end of your employee salaries. But it doesn’t tell you exactly how much to pay. The best way to determine a good salary range for your employees is to research your competitors. What is the “going rate”? How much do other nonprofits pay their employees for similar jobs in your area?

The National Council of Nonprofits maintains a database of state nonprofit associations. Most of these groups conduct periodic surveys of nonprofits in their states. They may collect nonprofit salary and compensation data.

Nonprofit employee benefits: What should you offer?

Of course, salary isn’t the only component of an employee compensation package. To compete for the best talent, nonprofits must offer employee benefits as well. Most job seekers won’t consider any offer that doesn’t include, at a minimum the following nonprofit employee benefits:

• Health insurance with prescription coverage;
• Dental insurance;
• Paid time off, or vacation and sick leave; and
• Retirement benefits.

There are also legal requirements for medical benefits to consider. And many nonprofit employee benefits include other fringe benefits and employee perks. Let’s take a look at some of these issues.

How does the Affordable Care Act affect nonprofit employee benefits?

Contrary to what you might have heard, the ACA does NOT require nonprofit employers to provide medical coverage. However, if you have 50 or more full-time equivalent (FTE) employees, you will pay a penalty if you don’t offer it. Full-time equivalent usually means working 30 or more hours per week and 130 hours per month. But if you have more than a few part-time employees, their combined hours can add up to count as a number of FTEs. So check the IRS rules and be sure you are counting correctly.

The ACA has mostly good news for small nonprofits with small budgets. If you have 50 or fewer FTEs, you can still compete with the big guys as far as your nonprofit employee benefits. Small employers can purchase employee health insurance as part of a larger “group” using the Small Business Health Options Program (SHOP). This allows you to leverage pricing options that were previously available only to large groups.

If you have 25 or fewer FTEs and you pay at least 50% of their health insurance premiums, you may qualify for the Small Business Health Care Tax Credit. For nonprofits, this “tax credit” is actually a refund. The IRS will return some of the income tax payments you withhold on your employees’ behalf. Healthcare.gov has a calculator that will help you determine whether or not you qualify. It will also tell you how much of a refund you can receive.

Creative ways that nonprofits can offer health insurance benefits

If your nonprofit doesn’t qualify for SHOP or the tax credit, you might still be able to find a way to offer health benefits. One idea is to join a cooperative arrangement with other nonprofits and share the cost of employee health plans. These coops are often cheaper than a group plan that you purchase on your own because they include a larger pool of employees. The bigger the group, the better the price your insurance carrier will offer. There are many coops that administer employee benefits like this. Some offer retirement benefits and HR administration as well.

Another option: Offer your employees a contribution toward privately purchased health insurance. Employees can buy health insurance in the ACA Marketplace using your contribution plus some of their own money.

Other nonprofit benefits ideas

If you need more ideas for creative fringe benefits that will make your nonprofit more attractive to job candidates, here are a few of our favorites:

• Maternity/paternity leave
• Meal train sign-ups for employees on extended sick leave or maternity leave
• Employee assistance programs (provide counseling, child care, etc)
• Allow employees to bring their kids to the office in the case of an emergency or sitter cancellation
• MVP/Employee of the year awards
• Quarterly lunch with the boss
• Bike to work incentives
• Gym membership reimbursement
• Smoking cessation program reimbursement
• Tuition reimbursement for CEU courses
• Birthday/anniversary parties
• Creative awards, like “neatest desk award” or “penny pincher award.”
• On-site health screenings or flu shots
• Free stability balls, standing desks, or ergonomic desk accessories
• Annual employee 5K race

This article is for informational purposes only. It does not represent HR or legal advice. Laws and regulations are subject to change at the national and local level, and you should seek legal counsel or an HR expert for advice specific to your inquiry.