Nonprofit employee benefits, benchmarked: How competitive are yours?
As most nonprofit employers know, employee benefits are a critically important factor in compensation strategies, especially as the talent market continues to tighten. To help nonprofits assess and improve their competitiveness, Work for Good has produced a new national study of benefits in the nonprofit sector.
Based on data from a new national survey and input from our partners (including Mutual of America, COUNTRY Financial, Marsh & McLennon, and our parent company, the Georgia Center for Nonprofits), the upcoming Nonprofit Benefits Benchmarking Study report lays out the landscape of benefits relative to the nonprofit sector. Most importantly, it’s designed to help nonprofits understand their own offerings relative to their peers, and learn how to leverage or enhance their offerings in order to retain employees and compete for talent.
Four top takeaways from the study:
1) 50 percent of responding nonprofits don’t offer any employee benefits. It’s perhaps unsurprising to discover that nearly all of these nonprofits are small organizations, with budgets of $750,000 or less. What’s important for this group to realize is that there are a number of options they can offer their people at little-to-no cost. Employer-sponsored benefit programs such as retirement plans, life insurance, tax-advantaged savings accounts (HSAs, HRAs, and FSAs), or short- and long-disability plans can all be offered without employer contributions. Benefits like financial wellness programs, flextime, or telecommuting options can be organized without cost. When it comes to attracting and retaining talent, adding any one of these options will catapult organizations ahead of nonprofit employers offering nothing at all.
2) Among respondents that offer medical benefits, 53 percent pay at least some part of the costs. Of those, most – 89 percent – are paying at least 70 percent of employee premiums. (At the high end: One-third pay the full cost of premiums for the employee, and 10 percent pay the full cost of premiums for spouses as well as dependents.) If your nonprofit contributes to employee premiums, consider paying 70 percent or more to remain among the most competitive of employers.
3) Of those offering employer-sponsored benefits, 87 percent offer a retirement program, but only 60 percent of those employers actually contribute funds to those plans. If a nonprofit employer contributes anything toward employee retirement, that puts them in the top 30 percent of respondents in terms of retirement benefit competitiveness. In other words: Even the most modest retirement match can mean a big competitive edge.
4) Nonprofits tend to undervalue their own benefits, despite what may amount to a very competitive package. Though nonprofits can offer great benefits that are specific to their cause – tuition offsets, tickets to performances, or adoption assistance – and are known for offering flexible hours and generous leave policies, over half of nonprofits offering benefits do not believe they translate into a competitive advantage. At the same time, over half of nonprofits also do not benchmark their offerings. This means they continuously fail to position themselves effectively in the market for talent. All employers should take the time to assess everything they have to offer, including intrinsic assets like flexibility, programs, facilities, and partners (think special rates at a gym, restaurant, or other service provider). Many for-profits tout the value of on-site ping-pong tables and employee discounts – why shouldn’t nonprofits do the same? Your benefits won’t make a difference in hiring or retention unless you understand their worth and spell it out for current and prospective employees.
“Most nonprofits struggle to keep up with the rising costs and increasing complexity of benefits administration,” said Work for Good CEO Karen Beavor. The key, she states, is benchmarking and creativity: “Maybe an agency can’t offer fully-paid maternity leave, but they could offer an employer-sponsored short-term disability plan that would offer a new mom partially-paid leave. What some employers don’t consider is the fact that just offering the program is a differentiator, regardless of whether an employer has the budget to make a contribution.”
Likewise, offering access to an FSA (Flex spending account) for health and childcare generally costs very little, but offers huge employee benefit. “Employers should at least benchmark internally by surveying employees about what benefits are most meaningful or valuable to them,” said Beavor. “Armed with this knowledge, they can, at a minimum, better articulate the value they offer currently, and perhaps research what is possible regarding commonly-shared wants or needs. The replacement cost of an employee is often 40 to 60 percent of their total annual salary, so anything employers can do to retain staff is more than worth it.”
In general, Beavor noted, support for HR and strategic talent development in the sector is low: “That’s why GCN is dedicated to producing readily-available, sector-specific resources like the Nonprofit Benefits Benchmarking Study.”
Marc Schultz is communications editor at Work for Good.
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