What percentage of nonprofit budget should be CEO salaries?

Keeping this ratio favorable enhances financial sustainability and reassures donors that their contributions are maximized. Fortunately, a nonprofit line of credit has enabled nonprofits to have a financing alternative to cater to any financial distress, including payroll. A nonprofit line of credit helps nonprofit owners prepare for cash flow crises and meet any economic challenges head-on. While nonprofit budgets and financial data are public knowledge, there can be some misconceptions about how much nonprofit executive staff “should” receive as compensation for their work. Often, large-scale nonprofits with national reach are the ones making headlines.

• Government funding complements the nonprofit sector’s other sources of funds and helps to broaden the availability of services.
• Another 18% have a budget between $50,000 and $100,000 – so they’re operating on two shoestrings instead of one.
• Grant tracking helps monitor restricted funding compliance, while cash flow projections ensure adequate liquidity.
• One of the problems with watchdogs is they put pressure on boards to cut administrative expenses down to a bare minimum which can negatively impede growth and progress.

Salary Allocation Percentage Calculator

While it’s possible to run payroll manually, in practice, almost all nonprofits use payroll software or services to streamline the process. If a nonprofit’s unrelated money-making activities get too big and swallow up the charitable goals, then the organization can lose its tax exemption. The IRS comes to the conclusion that it wasn’t organized and operated exclusively for charitable purposes after all. Below, we provide answers to common questions about setting nonprofit CEO compensation.

What Percentage of a Nonprofit’s Budget Should Go to Salaries?

Setting aside a budget for administrative costs can help to keep your small business on track financially in regard to operating expenses as well as how much you pay yourself. It can also play a crucial role in the strength of the overall budget in helping to attract lenders and investors. When using a percentage to allocate capital for administrative costs, two important factors include salary expenses and gross income. Nonprofits account for a large share of the United States workforce; it’s the third-largest employer of labor in the United States. Still, many nonprofits face a frustrating reality that undercuts their efforts to make payroll.

The Nonprofit Administration Dilemma: How Much Should You Spend on Fundraising? (

• This alignment helps create more accurate forecasts and smoother cash flow management.
• But your goal should be to spend appropriately on fundraising so you can bring in the money you need to fully fund your programs.
• A well-designed template transforms nonprofit budgeting from a yearly burden into an ongoing strategic tool.
• On the other end of the spectrum, if you’re spending more than 25% of your total income on fundraising and administration, your donors may be turned off and stop giving, which means your programs may suffer.
• It consists of all revenues and expenses your company expects to use for its operations.
• That means that you’re spending 10 hours, or 25% of your 40 hour work week at the program.

This includes questions about how to determine a peer group for compensation comparisons, approach cost of living or merit increases, and more. Stuart Wales, MS, SHRM-CP, PHR, CCP, is an HR technology advocate, working with clients to leverage solutions that align not only with their current needs but also their strategic needs for the future. A larger budget on salary increases alone is not strictly enough to address attraction and retention challenges. Half of respondents also indicated that they would continue to leverage sign-on bonuses. To answer this question for our members, ChurchSalary surveyed over 3,000 churches about their spending on staff salaries and benefits. While these churches represent a fraction of the churches in our entire database, these results are statistically significant and revealing.

The president, the head of the organization, often represents the organization in the media, and runs board meetings. Positions on the Board and Their Responsibilities Typically, the non-profit board includes a president, vice president, treasurer, and secretary. When making decisions, beware of blunt instruments like pay averages.

Donors and grantmakers want to know that their money is going to an organization that is financially healthy and stable. Payroll can seem daunting, and if you’re part of a small nonprofit, you might be worried about making mistakes. However, nonprofit work can still be financially rewarding while offering the intrinsic satisfaction of contributing to meaningful causes. Nonprofit HR is the leading human resources firm in the country that works exclusively with the nonprofit sector.

It’s Time to Demystify Small Business Banking

• I believe that nonprofit compensation must be higher, fair, and not determined based on a scarcity mindset.
• Zero-based budgeting requires examining every expense anew, regardless of its history in your organization.
• This means you may be running payroll on your own, with little or no guidance.
• This rigorous approach ensures each dollar actively contributes to your nonprofit’s mission and helps eliminate legacy costs that no longer serve your current goals.
• However, it is necessary to be sure the compensation is commensurate with the role, organization size, and in comparison with the marketplace.

As your board evaluates how much to spend on fundraising efforts, it’s prudent to consider how new your nonprofit is and what your mission is. The media and donors have access to your IRS Form 990 through GuideStar, an online database, and they use the data to inform their opinions about your nonprofit’s performance. Charity Watch has one of the most sophisticated and complex scoring systems to rate nonprofit financial health. As an example of how Charity Watch works, it gives the American Red Cross an A- rating it costs them $25 to raise $100. Seek out the sweet spot where you are spending enough on fundraising to implement your strategies and sustain them over time, but you’re not overspending on solutions and shortcuts that don’t pay off. This total should not go over 35%, the cap recommended by the Better Business Bureau here in the U.S.

The Nonprofit Administration Dilemma: How Much Should You Spend on Fundraising? ›

The IRS (which regulates tax-exempt status) allows a 501 (c)(3) nonprofit to pay reasonable salaries to officers, employees, or agents for The Key Benefits of Accounting Services for Nonprofit Organizations services rendered to further the nonprofit corporation’s tax-exempt purposes. Joanne Fritz is an expert on nonprofit organizations and philanthropy. A capital budget focuses on long-term investments rather than day-to-day operations. It includes major purchases like buildings, vehicles, technology systems, or equipment that will serve your organization for several years. Capital budgets typically span multiple fiscal years and often require specific fundraising campaigns or financing arrangements.

Frequently Asked Questions (FAQs) about Nonprofit Payroll

However, you could have bylaws that https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ allow for two people to be co-presidents and share duties. To get more ideas of what to ask for in a total compensation package – beyond salary – check out my training on the 25+ ways EDs can make more money and have less stress. For example, I have a client in Michigan now who founded her organization. She used data from her peers in Metro Detroit to determine if her pay was aligned with the sector and region.