I have heard nonprofit managers say that salaries in the nonprofit sector are about a third less than the private sector because nonprofit employees are willing to work for less in order to have the satisfaction of working for some altruistic cause. Nonprofit employees might also get more flexible work hours and better benefits.
On the other hand, nonprofits may pay more because they don’t benefit from wage cost savings (donations don’t increase as a result of lower wages and government grants are typically cost-plus contracts) the way for-profits benefit from lower wages. In addition, nonprofits may choose to hire better people at a higher salary in order to get higher quality outcomes.
What is the truth? Here are the facts according to a 2009 report by Amy Butler at the Bureau of Labor Statistics.
The average earnings of everyone in the nonprofit sector is 6% higher than those in the private sector. State employees are 16% higher than the private sector, and local employees are 23% higher.
However, the average salary of nonprofit managers is only 82% of their for-profit counterparts. This pattern repeats itself in other “managerial” professions. In business and financial management, nonprofits pay 87% of private sector employers; in computer and math applications it is 89% and in legal occupations it is 82%.
But for office and administrative support occupations, nonprofit compensation is the same as the private sector. For community and social services workers, nonprofit salaries are 99% of the private sector, and for healthcare support and personal care services they are 97% of the private sector.
What is the bottom line? The compensation of nonprofit employees in support services functions is similar to the private sector’s compensation. But nonprofit managers and their financial, legal and computer professionals, their compensation is about 85% of their private sector counterparts.