Who Gets Paid In a Nonprofit? Nonprofit Employment Rules Explained

by | Jun 12, 2020

Who gets paid in a nonprofit?

Turnover in nonprofits is around 19%, primarily due to low pay.

Nonprofits need to ensure that employees are paid fairly, following federal guidelines, but how does a nonprofit pay employees?

Read on to learn more about who gets paid in a nonprofit.

Who Gets Paid in a Nonprofit?

First and foremost, volunteers are not paid employees. Volunteers offer time and specific skills at no financial cost and are coordinated and directed by paid employees.

There are a few critical ways to determine who gets paid and how much they are paid. The determination of payment is through federal and state regulations on overtime and minimum wage. 

If you are asking yourself, “Can the founder of a nonprofit receive a salary?” The answer is yes.

The most important thing to consider with executive nonprofit salaries is that they are not excessive. The inurement clause of 501c3 salaries means nonprofit resources cannot benefit a private party.

How Does a Nonprofit Pay Employees?

When determining reasonable compensation for nonprofit salaries, you should consider a few things. These include:

  • Your organization’s history, purpose, and mission
  • Employee education, skills, experience, and pay
  • A comparison of similar jobs elsewhere

A great way to stay impartial and determine how and who gets paid in a nonprofit is with a board of directors. At a minimum, these voluntary members are an arbitrary source to help provide foresight, oversight, and insight.

How Do You Pay Yourself in a Nonprofit?

A qualified board of directors will help you pay yourself in a nonprofit, without the ethical dilemma of undercutting or overestimating your financial worth. Their oversight will provide the arbitration you need to determine 501c3 salaries fairly and appropriately.

As a founder or CEO, you can and most likely should be on the board of directors. As you’ll be working alongside several other people, you’ll still have the ethical accountability for determining who gets paid in a nonprofit. You will also have insight into how much each individual should be compensated for his or her expertise, beyond whatever concrete skills they bring to the table.

501c3 Salaries and Benefits

There are regulations on how you pay nonprofit salaries, but they can also offer similar benefits as for-profit companies. For example, you can offer a few things such as:

  • Vacation and sick pay
  • Medical and dental insurance
  • Retirement plans
  • Flexible work schedule
  • Educational assistance

Competitive benefits packages like these can help balance out your employees’ ineligibility for bonuses or stock options. 

Nonprofit Salaries: Getting Paid

You no longer have to ask, “Who gets paid in a nonprofit?” Instead, you can focus on paying employees fairly, as well as coordinating benefits packages that remain within federal regulations. Do not be afraid to refer to the IRS guidelines on 501c3 salaries.

For more information to reference on paying out nonprofit salaries or to learn more about information about financial operations in a nonprofit, please refer to our website today.


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