How Are You Treating Your Staff? Some Thoughts on the Ethics of Nonprofit Compensation

Nonprofits are specifically formed to provide charitable benefit - to do good in this world, to work for positive change. So it's troubling to discover in my consulting practice how poorly employees are often treated, usually under the guise of economic constraints:

• Minimum wage: In the midst of the recent push to increase the minimum wage, numerous instances have surfaced where nonprofits have insisted they cannot afford to do so and asked for special dispensations. There is a deep disconnect between a charitable mission of making this world a better place and nonprofit staff who are paid wages that leave them at near-poverty level.
• Exempt vs. non-exempt: Non-exempt employees are entitled to overtime pay; exempt employees are not. With few exceptions, to be exempt an employee must be paid on a salary basis (under federal law as little as $23,600; for California $37,440), and perform exempt job duties (administrative, executive professional.) Do your exempt employees meet all of these standards? Does your nonprofit have exempt workers at low salary levels? Here's what President Obama had to say about this: "It doesn't make sense that in some cases this rule actually makes it possible for salaried workers to be paid less than the minimum wage. If you're working hard, you're barely making ends meet, you should be paid overtime. Period."
• Independent contractor vs. employee: You are required to withhold and/or pay income tax, Social Security and Medicare tax, and unemployment tax for employees but not for independent contractors. Here are some basic guidelines for determining status: Employees provide services that are a key aspect of the organization, which has the right to direct and control the worker. Independent contractors usually have their own offices, work for other organizations as well, and are paid a flat fee for a specific project. Note that the IRS does not consider a contract defining status to be a sufficient determinant. It's not ethical to label a key employee as an independent contractor just so you don't have to pay the cost of basic benefits - and it's also not legal.
• Part-time vs. full-time: You all know what "part-time" means in the real nonprofit world - it means dedicated, overworked program and administrative staff (usually defined as exempt) who put in many more hours than they paid for just to be able to get their work done.
• Income inequality: It's not only for-profit organizations that boast big disparities between salaries for executives and staff. Many nonprofits, particularly in the education and health care fields, have executives making thousands of dollars more than basic program and administrative employees. And I've seen this even in community nonprofits with budgets of $500,000 or less. Labeling employees as exempt, part-time, and/or independent contractors contributes to this gap.

Here's my plea - take the time to evaluate your compensation policies. Pay all your employees reasonable salaries, define staff hours that reflect how much time is needed to get the work done, and provide basic benefits. Along with doing your good work, consider doing the right thing by your staff.

How Important Are Job Descriptions?

In two words: very important. And yet, frequently job descriptions remain on the virtual shelf gathering dust until an employee fails to meet expectations or leaves or gets fired. Here are three important reason to review and revise organizational job descriptions on an annual basis:

     1) The job description is your key document defining essential job functions and qualifications. In other words, it outlines what your employees are supposed to do as well as required skills and certifications, sensory and physical requirements, work schedules, chain of command, and salary. It should also state whether the job is exempt or non-exempt. Non-exempt employees are entitled to overtime pay under the Fair Labor Standards Act (FLSA); exempt employees (typically salaried administrative, executive, and professional staff as delineated under state and federal guidelines) are not.
     2) The job description helps protect your organization from lawsuits. Wrongful termination lawsuits are the most common suits to hit nonprofits. Consider this: if you don't have written documents that say your employee needs to be able to lift heavy weights, you've got a problem on your hands if you discover the employee cannot do so and you want to let them go. The Americans with Disabilities Act (ADA) does not require written job descriptions, but having them provides clear evidence of whether a particular job function is essential. It is legal to decline employment to someone if their disability makes it impossible to do the job as per clearly documented duties. Note also that the Occupational Safety and Health Administration (OSHA) requires you to document any hazardous exposure as well as specific environmental and/or safety conditions of your work environment (such as hot or cold temperatures, fumes, loud noise, etc.)
   3) The job description provides the basis for your annual performance reviews. (You are doing annual performance reviews aren't you? If not, start right now). Your review process should include a written assessment of job performance in every aspect listed in the job description. It provides the opportunity to note when employees need more training or assistance as well as to pinpoint if in fact the job duties have changed over time. In which case you need to rewrite the job description.

Here is some important language to include: "This nonprofit organization retains the discretion to add or change job duties at any time." And this: "The essential functions include but are not limited to…"

Here are some job requirements to include that you might not have considered: physical requirements including vision, ability to answer phones, driving for a specific purpose; work schedules, especially if night and/or weekend work is required; ability to work well with others (co-workers, Board members, clients, volunteers); ability to handle stress, challenging situations, and difficult people; specific information about required technological skills.

A job description is a living document, one that is a key element of prudent management. Change it as needed based on organizational priorities, input from performance reviews, and staffing changes.

Ten Fascinating Facts About California Nonprofits

The California Association of Nonprofits recently released Causes Count, a report on the impact of the nonprofit sector throughout the state. Here are ten fascinating (and sometimes surprising) facts I gleaned from the report to share with you:

     1) Nonprofits represent a significant part of the California economy: 15% of California's Gross State Product (a measurement of the state's total economic output) comes from the nonprofit sector.
     2) There are 170,783 nonprofit agencies in the state: Of these, 72,000 are 501(c)(3)s - charitable organizations operated exclusively for exempt purposes and eligible to receive tax-deductible contributions in according with IRS tax codes.
     3) Almost 1 million people work for a nonprofit organization: This means that 6% of all state jobs are in the nonprofit sector, with the largest percentage in health care and education.
     4) The nonprofit sector is the 4th largest industry in the state (based on number of jobs): That's more than construction, finance, and real estate. Nonprofit job numbers are topped only by the leisure/hospitality industry, retail businesses, and manufacturing.
     5) Just about every nonprofit relies on volunteers: Whether large corporate-style agencies or small grassroots organizations, all nonprofits utilize volunteers and all of them have more volunteers than paid staff.
     6) Volunteers contribute $24.7 billion in unpaid volunteer labor annually: That's the equivalent of 450,000 full-time employees. A whopping 86% of these volunteers say they love what they do.
     7) And they're not just stuffing envelopes: More than half of these volunteers do significant work in the areas of fundraising and deliverance of core programs.
     8) Plus 400,000 people sit on nonprofit boards: That means one out of every hundred people you know contributed time and expertise as a proud member of a Board of Directors.
     9) That brouhaha about nonprofit mismanagement and excessive overhead costs has very little basis: On average, nonprofits spend 89% of their total budget on program expenses, with just 10% designated to management and a mere 1% to fundraising. Of the folks polled by the California Association of Nonprofits, 80% were confident that California's nonprofits deliver quality services and operate ethically to serve the public's benefit.
     10) Nonprofits pay taxes: Contrary to popular belief, nonprofits actually pay a significant amount in state and federal taxes - $37 billion annually, largely in payroll taxes.

Looks like good work turns out to be darn good for the economy and for the state.