DRG

TRENDS IN BENEFITS FOR NONPROFIT EXECUTIVES
May-August 2000

Introduction

This article, written and researched by DRG staff members, represents a brief survey of the current literature in 2000 surrounding benefits trends for nonprofit executives. These benefits have been cropping up more often in recent years. Here is a guide to some of the most common.

Monetary Bonuses

Monetary bonus programs are increasingly becoming a component of nonprofit executive´s compensation packages. Studies are showing that these bonuses are being awarded more frequently to the top officers of civic associations and cultural organizations than to those serving educational and human service foundations. (1)

In a study conducted by the National Society for Fundraising Executives, 19.6% of the respondents received a bonus in 1998. Approximately 4% of respondents received a bonus of 10% or more of base salary and 12% received a bonus of 4% or more. (2)

There are several different types of bonuses that are becoming quite common. Below are descriptions of some of the most prevalent.


	Longevity Bonus
	These are awarded for several different reasons. One is to reward employees for spending many years at a given institution. In another example an organization might offer a bonus halfway through a difficult campaign or project to those who stay through until its completion. (3)

	Performance/Merit Bonus
	These are increasingly common in the nonprofit sector. A survey conducted by Ernst & Young of 193 nonprofit groups in the NY metro area ("The 1998 Metro New York Not-for-Profit Compensation & Benefits Survey") reported that 36% of chief executives were eligible for a cash incentive as a reward for good performance. The average bonus was $23,483, or 17% of their base salary.(5)

	Signing Bonus
	Signing bonuses are increasing in popularity, and are a means by which to encourage a prospective employee to commit to a new organization. They are usually in the range of 5 to 15% of the new base salary.(3) In a recent study 16.9% of employers said they would pay a one-time bonus when recruiting a new chief executive.

Company Cars

Educational institutions and human service organizations are more likely to purchase or lease cars for their top executives than are other nonprofits. This perk is also more common on the West Coast than the East.(1) Others reimburse executives for any business use of their private vehicles.

Employment Contracts

An employment contract is an agreement between an employer and employee that may delineate such conditions as the number of years of guaranteed employment, set pay increases, severance pay, and/or a detailed description of the job´s responsibilities.

In the NonProfit Times´ 2000 Salary Survey, 30% of responding employers reported that their chief executives have employment contracts. On top of that, 35.7% of employers who were not currently using an employment contract said they would provide one if a candidate for a top position so desired.(4) Many employees reported that while they didn´t have a formal employment contract, they did have a written description of their position. 26.3% of responding employees reported having an employment contract; 89.1% have a written position description.(2)

Flexible Work Schedule

A flexible work schedule can be a competitive advantage in attracting top talent if an organization has the ability to offer it. In the age of telecommuting a nontraditional schedule has become somewhat more common. However, the importance of having all of the members of the staff together in the same place at the same time varies from organization to organization, and can sometimes make flexible hours very problematic.(4)

Club Memberships

	Golf/Country Only a very small percentage of nonprofit organizations offer this deluxe perk. These few are mainly educational or cultural institutions.(1)

	Lunch Club Membership to a "lunch club" is a much more common benefit, particularly in cultural organizations, educational institutions and foundations in the Mid-West. Aside from their being a nice place to eat, many executives put their lunch clubs to work for their organizations by using them as a site for fundraising efforts. The clubs sometimes donate memberships to nonprofits in exchange for being listed as a donor.(1)

Housing

In a growing trend, organizations have been adding housing support to their compensation packages. In most cases, the company will assist the employee by means of loans for down payments, points, broker fees, mortgage assistance, or apartment rental and cost of living adjustments. This benefit is less common in Middle America than it is on the East and West Coasts, where housing costs are higher. A survey conducted by the Chronicle for Philanthropy found that housing benefits were more common in New York than in any other city. Educational and some human service institutions, can provide on-campus housing.

The scope and variety of the benefits being offered to executives is ever expanding giving rise to a growing number of miscellaneous perks that are routinely grouped together under the all-encompassing heading of "fringe benefits."

Ninety-five percent of nonprofit executives receive travel reimbursement, 84.4% have their professional organization dues paid for by their organization, 84% get reimbursement for local mileage on their car, 58.7% receive full or partial tuition reimbursement, 52.8% receive fully or partially paid for club memberships, and 47.5% receive an automobile allowance. (2)

Of the 246 surveyed by the chronicle of Philanthropy, 25 chief executives were awarded fringe benefits valued at $100,000 or more.(9)

Retirement Plans

The rules surrounding retirement plans for nonprofit executives have changed in the last few years. Nonprofits have traditionally only had the option of offering 403(b) retirement plans to their employees. Starting January 1, 1997, however, all nongovernmental nonprofit entities have been also allowed to offer the 401(k) plans that have long been in use in the for-profit sector. This plan may or may not be more attractive to the employer and employee, depending upon the specific financial circumstances of the organization and the individual.(11)

Only 11% of nonprofit employees have no employer-sponsored retirement plan.(2)

Sabbaticals

Eight percent of nonprofit employers offer paid sabbaticals that can range in length from one month to over a year after a defined period of service. Additionally, according to the Society for Human Resource Management, one quarter of nonprofits offer the option of unpaid leaves.(12)

Strategic Pay Raises

Occasionally an organization will decide that a spontaneous pay raise is in order for an individual or a group of individuals. These are usually given for strategic reasons, for example to offset the reaction to raises at a competing organization, or after an executive resigns, to attempt to prevent further resignations.(3)

Supplemental Retirement and/or Insurance Benefits

These benefits have been decreasingly common in recent years. Currently, roughly 30% of nonprofit executives receive supplementary retirement or insurance benefits. Of those who still do receive supplemental insurance or retirement funds, the dollar amount varies widely from around 10% to nearly 300% of the base salary.(1) Often these benefits address a difference in key insurances between a current employer and previous employer´s benefit. Others may be part of compensation rewarding merit, longevity or unique retirement concerns of a beloved executive.

Training/Continuing Education

Many organizations take on the financial responsibility for helping their top employees achieve or maintain the up to date training needed to stay on top of issues and skills essential to their job. For example, in a 1999 profile of its membership, the National Society for Fundraising Executives found that 72% of its members had all of their personal training costs paid by their employer while another 11.6% had at least 50% covered.(2)

Tuition Benefits

Educational institutions are most likely to offer this benefit with the most common example being the college or academy faculty or administration member whose child is given free or reduced tuition to the school.(1)

Voluntary Benefits

Voluntary benefits are another smart way for employers to sweeten an executive´s package without taking on too much additional cost. Some examples are Transit Checks, STD & LTD, Life Insurance, long-term Care, Accidental Death & Dismemberment, Personal Auto, Homeowners, and Group Legal Assistance. (13)

Selected Articles

Spencer, Stuart, Issues in Not-for-Profit Management, summer 1998
NSFRE, 1999 Profile of NSFRE Members
Hall, Holly, "Charities Offer New Incentives to Find and Keep Fund Raisers," The Chronicle of Philanthropy, April 22, 1999
Clolery, Paul, The NonProfit Times–NPT Salary Survey, February 1, 2000
Marchetti, Domenica, "Pay at New York Non-Profit Groups Beats Inflation," The Chronicle of Philanthropy, September 23, 1999
Labaton, Stephen, "New Rules Lift the Lid on Non-Profit Pay," Giving-A Special Report, The New York Times, November 17, 1999
National Journal, "The Benefits Game," January 14, 2000
Pope, Tom, "Tax-Deferred Pay: Some stock plans are risky," NonProfit Times, April 2000
Chronicle of Philanthropy, "Top Leade´s See Fatter Paychecks," September 23, 1999
Barber, Putnam, Nonprofit Online News Bulletin, February, 3, 1999
Chambers, Robert Gordon, Don Kramer´s NonProfit Issues, Supplement Ready Reference #4, "Compare Benefits of 401(k) and 403(b) plans.
Sommerfeld, Meg, "A Break Between Good Deeds," The Chronicle of Philanthropy, March 23, 2000
Robinson, Judith L., CPCU, "Stretching the Benefit Dollar," Association Executive, No-Dec 1999