A compensation analysis is the process of organizations gaining a clear understanding of how they pay their employees compared to other organizations; this can be based on sector, size, operating budget, etc. This process involves looking at internal and external factors, analyzing compensation data, performing market research, and using all the findings to create a compensation strategy tailored to the organization’s needs.
Many factors can drive the need for a compensation analysis. If your nonprofit is experiencing any of the below, consider conducting a compensation analysis.
State job posting requirements
Legal compliance concerns
Difficulty attracting talent
Inequitable pay practices claims
Why It Is Important:
A compensation analysis serves as a process that can highlight important insights into an organization and its practices.
Strategic Perspective: Performing a compensation analysis provides insight into how your organization's offerings differ from other competitors. Implementing the recommendations from such an analysis not only ensures competitiveness in compensation but also builds the capacity to attract top talent . By staying up to date with market trends and aligning offerings accordingly, organizations can position themselves as highly desirable workplaces.
Equitable Practices: The importance of equitable salaries resonates strongly with employees, and a compensation analysis allows for any existing disparities to be highlighted. Implementing an equitable salary strategy promotes fairness and fights against discrimination and bias within the organization. Having sound salary structures makes leadership confident about publicizing salary ranges in job advertisements (mandated now in many States).
Retention Improvement: Employees often leave roles due to various factors, with salary being a
significant contributor. When organizations match their offerings with current market rates, they maintain a competitive advantage. Compensation serves as a crucial factor in making employees feel appreciated and engaged in their roles, leading individuals to wanting to stay. Having precise salary levels and ranges allows an organization to show the growth an individual can have when developing within. When well maintained and consistently applied, salary structures can help retain staff and show a clearer path for career growth.
Steps to Take When Performing a Compensation Analysis:
Internal Resources: Evaluate job descriptions to better understand job responsibilities and the requirements and experience needed for the role. While job titles are relevant, job duties can better match roles from company to company.
External Resources: Review relevant market research that closely aligns with the organization. The aim is to utilize at least three surveys and look at them from different perspectives (e.g., at the 25th, 50th, and 75th percentiles).
Validation Session: Leaders should review the data gathered and ensure that roles match descriptions from survey sources, and weigh tenure and performance when deciding how to position individuals within salary ranges.
Equity Lens: Uphold fair and equitable salary structures by considering age, gender, tenure, and race within teams. Organizations have the flexibility to choose equity lenses based on elements that reflect their mission or the communities they serve.
Benchmark Benefit Offerings: Recognize how the current organization’s benefit offerings (e.g., health benefits, PTO, retirement options) match against similar entities. This benefit analysis, when performed along with salary benchmarking, and other variable pay (e.g., bonus) constitutes what is referred as total rewards or total compensation.
Salary Bands: Develop updated salary ranges based on findings, with minimum and maximum salaries, to allow staff to see a clear view of their growth opportunity within the organization.
Report: Share a final report that outlines the research, gaps, and recommendations. This information can be communicated at the staff and board level. Communication strategies can be crafted for one-on-one conversations with individuals whose salaries may be impacted.
Kiwi Partners’ HR services team understands the unique needs of nonprofits and recognizes the crucial role that a comprehensive compensation analysis plays in ensuring equitable and competitive salary and total rewards. Connect with Kiwi Partners to learn how we partner with leaders to develop compensation strategies that support your mission and contribute to the overall success of your organization.