GuideStar Blog

Carrots or Karats: Rethinking Benefits for Nonprofit Employees

Benefits are a key factor when job seekers evaluate job opportunities. Even though budget constraints often dictate a ceiling on nonprofit salaries, a competitive and robust benefits package can be an effective way to attract talent and retain employees. A nonprofit can decide on a variety of monetary and non-monetary benefits. With some care and creativity, organizations can turn a benefits package from average to competitive.

Tip #1: Skip the matching and make retirement planning possible.

Offering a retirement plan like a 403b can be expensive for some nonprofit organizations; they may not, however, be as cost prohibitive as one might imagine. In general, retirement plans become expensive when employers agree to match contributions made by employees. If an employer agrees to match up to 5 percent of an employee's base salary for every employee, annual costs for even a small organization could sail high into five to six digits annually.

It may be surprising to learn, however, that an organization can offer a retirement savings plan to employees for under $200/month, if contributions are not matched. If an employer does not match contributions, it is only responsible for paying the administrative fees charged by the benefits company used to manage the retirement savings plan. To scale retirement plans over time, organizations have a few options. For example, if an organization winds up in the black at the end of the year, this profit can be distributed to employees in the form of an end-of-year bonus that can be added to an employee's retirement fund.

Tip #2: Consider the cafeteria plan.

A cafeteria plan is outlined in section 125 of the IRS tax code. Offering a cafeteria plan provides a level of decision making to each employee and it communicates to your staff that you value exactly what each member values. Typically, managing these plans requires diligent administration to ensure that it is in compliance with IRS guidelines. If your organization is already employing a benefits administrator, he/she will be able to manage the plan.

Tip #3: Get flexible!

Flexible spending accounts (FSAs) allow employees to set aside a portion of their paychecks for qualified expenses associated with medical care and dependent care. Money that is deducted from a participating employee's paycheck and placed into an FSA is not subject to payroll taxes. The payroll tax savings can be a valuable benefit to your employees. The other good news about FSAs is that nearly every medical and child care cost qualifies. Common expenses such as contact solution, co-pays at the doctor's office, daycare fees, diapers, aspirin, and gym fees can be deducted from an employee's payroll, thus reducing his/her taxable income.

Tip #4: Get creative!

If your organization is unable to offer these types of financial benefits for your employees, do not despair. Thinking a bit outside the box can yield benefits that your employees will really appreciate.

Start by reflecting on your culture. How do you reward hard work or success? Would you allow an employee to work from home for a day as a reward for some noticeable achievement? Do you throw parties to celebrate organizational milestones? Do you recognize birthdays? These may sound like trite questions, but demonstrating that you pay attention to and reward hard work in creative ways can show an employee that management really appreciates his/her contributions.

Learn about what makes your employees tick. A common strand in many nonprofit job seekers is that they are motivated by doing good for the public. They might, however, not get the chance to exercise their unique brand of social justice during the 9-5 workday, or they might be too burnt out to volunteer as much as they would like. Consider incorporating a few days off for volunteering into your vacation package. This practice might allow an employee to play the role of a scout leader for an extended weekend camping trip or encourage the former College Democrat to drive seniors to the polls on election day without spending his/her well-deserved vacation days.

If your nonprofit is located in a city, you are literally surrounded by opportunities for your staff members to spend their hard-earned salaries. Hit the streets and talk to the management of local gyms, restaurants, movie theaters, parking garages, and coffee shops to see if you can work out discount prices for your employees. Kiva, a nonprofit in San Francisco that promotes micro-finance investments in developing countries, touts 50 percent off at a sushi restaurant in its benefits package. Similarly, the EF Foundation in Boston offers its employees discounted tickets to Celtics and Bruin games at the teams' nearby arena.

Tip #5: Revisit time off and work arrangement policies

In a recent study by Commongood Careers, The Voice of Nonprofit Talent in 2008, nonprofit job seekers ranked benefits such as "vacation policies" and "flexible work plans such as 4-day work weeks and working from home" as the most important non-salary benefits. These factors ranked far above traditional benefits such as dental and vision insurance, performance bonuses, tuition debt support, and family leave.

There are a number of low- to no-cost ways to implement alternative time off and work arrangement benefits. Pick two to three non-holiday Fridays and declare them organizational holidays. Offer unpaid summer vacations to those who want it and whom you can afford to have out for a few months. Encourage employees to utilize flextime, the option to work less than 40-hour weeks, or work part-time from home. Invest in your management capacity to maintain performance levels within an increasingly flexible office.

Tip #6: Collaborate with your employees on what they want.

Do you use "collaborative" anywhere in your literature, Web site, or job descriptions to describe your organization's culture? If so, practice what you preach and bring the staff to the conference table to discuss benefits. If all are involved in the discussion it will be clear to your employees that you are serious about providing benefits and that you want to do what is best for each individual. Failing to communicate with your team about benefits might create a negative perception that the organization is too poor or too cheap to take benefits seriously. If benefits that employees want are too far out of reach, be honest about it and work through alternatives. Being open about goals and concerns can be a benefit in itself.

There are a number of on-line resources that have more tips that might help you rethink benefits for your employees. Web sites such as www.irs.gov and www.commonwealthconnector.com offer good places to start. Paychex also has great information on flexible benefits packages. Considering these tips and offering creative and flexible benefits will communicate to your employees that you are concerned with the aspects of their lives that occur beyond the office while keeping your organization competitive to active job seekers.

Kevin Kovaleski, Commongood Careers
© 2008, Commongood Careers

Kevin Kovaleski is a service manager at Commongood Careers, a national nonprofit search firm dedicated to helping today's most effective social entrepreneurs hire the best talent. Founded by nonprofit professionals, Commongood Careers offers personalized, engaged services to job seekers and organizations throughout the hiring process as well as access to a wealth of knowledge about careers in the social sector.
Topics: Nonprofit Leadership and Practice