Nonprofit organizations offer people the opportunity to achieve outstanding feats together. Those who choose to pursue a career in a nonprofit spend their days working for the common good. All around the world, nonprofits are working to better communities and the lives of those within them.
To run effectively, nonprofit organizations need strong leadership. At the forefront of this leadership is an Executive Director. These are the individuals who fearlessly lead their teams to ensure that everything runs smoothly.
Since nonprofit organizations donate the money they receive to further the community, you may be wondering how to determine salaries for each employee. If you’re interested in pursuing an Executive Director to grow your nonprofit and want to know more, you’ve come to the right place. Learn more about the regulations and factors that influence Executive Director nonprofit salaries.
Nonprofit Salary Regulations
Every nonprofit organization must have a board of directors that determines the average nonprofit Executive Director’s salary. This board follows a specific process outlined by the IRS to decide on a salary. The process is as follows:
- First, the board must arrange an “authorized body” that will discuss and decide on the salary. This body should not involve any individuals who may be a conflict of interest for the nonprofit (i.e. individuals who are not paid by the organization).
- This body must use comparability data as they determine the Executive Director’s salary. This data will include salaries and benefits from similar organizations based on geographic location or budget.
- Once a conclusion is reached, the body must properly document the process. This includes who was involved and what data was used.
The documentation and final determination of the nonprofit Executive Director’s salary must be reported to the IRS. Typically, these salaries are approved and the nonprofit organization can move forward with the onboarding process. However, there are certain situations in which the IRS may deny the reported salary if there is significant evidence that it is not comparable to similar organizations.
Additional Factors That Influence Salary
In addition to the extensive regulations, there are other factors that may influence an Executive Director’s nonprofit salary. These include but are not limited to:
Previous Experience
A candidate’s experience level is an essential factor in selecting an Executive Director’s nonprofit salary. Each nonprofit organization focuses on a specific part of the community, from social to environmental issues and more. If a candidate has previous experience working in your specific sector, they may bring more to the organization. This may lead to an increase in the Executive Director’s nonprofit salary.
Type of Funding
There are a variety of nonprofit organizations. Each type receives different forms of funding that will assist in paying this salary. From government grants to private donations, the type of funding your nonprofit uses will play a role in how much that nonprofit can offer.
Organization Size
On top of paying an Executive Director’s salary, your nonprofit needs to provide a salary and benefits to all of the other employees that bring the organization’s goals to life. The authorized body will need to take this into consideration when looking at comparable data and how other organizations manage these payments.
Geographic Location
The average nonprofit Executive Director salary in Arizona will differ from that in Virginia. The geographic location of your nonprofit will impact the Executive Director’s nonprofit salary. When the board of directors meets, this location should be considered when looking at comparable data.
Executive Director Nonprofit Salaries
What exactly should you expect as you interview for a nonprofit Executive Director role? The average nonprofit Executive Director’s salary in the U.S. sits between $54,619 and $115,192, with a median of roughly $79,033.
Though this is the average across the country, it will change based on the aforementioned factors. The average in Phoenix, AZ sits just under the national average at $78,072. Virginia’s average sits right in the middle of the two at $78,558.
Find Your Next Executive Director With Recruiterie
Working alongside an executive recruiting firm like Recruiterie can help you find top candidates for an Executive Director at your nonprofit. With expertise in nonprofit recruiting, we’ve created a specialized approach to finding leadership candidates that meet your needs. We spend time getting to know your nonprofit and developing deep partnerships that can make hiring a breeze.
Contact our team today to learn more about our services and how we can assist you in finding your next nonprofit Executive Director!