Standard D4 Explained

Definition: Compensation Policy¹
A compensation policy documents the organization’s philosophy and direction with regard to rewarding its employees.

Why is it essential to have a compensation structure that fairly evaluates and compensates the value of each position? Your organization’s compensation structure reflects and influences its work culture.² The HR Council for the Nonprofit Sector suggests that compensation structures consider both internal and external equity and that all salary ranges be reviewed at least every two years or when there are significant changes to an employee’s job description.² Although nonprofit organizations have traditionally paid lower salaries than private companies, trends toward increasing professionalism in the sector require organizations to offer competitive salaries and benefits packages in order to attract and retain employees with the right skills and expertise.³ In developing competitive compensation packages for employees, nonprofits and charities should consider the salaries of comparable positions in other nonprofit organizations, the public sector, and the private sector. It is important to remember that compensation involves much more than cash, including health benefits, pension, vacation, professional development opportunities, flex time, working hours,² and cost of living adjustment.⁴

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “Standards Program Definitions,” Imagine Canada, May 2011.
2. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.
3. “Compensation: The Inside Scoop on Nonprofit Payrolls,” Julie Stauffer, Charity Village, August 15th 2011.
4. In Fort McMurray, Alberta, certain nonprofit staff positions qualify for a cost of living adjustment depending on the source of funding.