In this following article, we will discuss whether you can pay yourself a salary in a non profit. When you start a non profit you must do everything on your own and work for free in place of taking a salary of nonprofit. In starting, all things look essential and you really want to see your new organization run successfully so you can do the work for the public welfare and provide a change in the society.
It doesn’t matter whether you’re independently wealthy or have another source of income, you will need to pay yourself at some point. Or pay yourself more than you are now so that your nonprofit provides you with a living wage.
Paying yourself can be an intimidating prospect. It can feel like a lot of money when you’re looking at the nonprofit’s tiny checkbook. And it’s a big step for the very new organization. To raise funds becomes much more high-stakes. If the revenue will not come, will you be able to make a salary? or What is a PCT Salary?
So, how do you know when it’s time to pay yourself? And how do you select your nonprofit salary? Let’s have a look:
When to Start Thinking About Getting Paid
If money is coming after what you need to spend on a program during your budget’s financial year then you are ready to decide about a nonprofit salary for yourself.
If not, you need to focus on increasing your revenue. If your non profit organization receives funds completely by donations, as many nonprofit organizations got, you have to search for more donors. Keep aside the goal of paying yourself for some time and focus on making your donor base.
If your organization is getting enough money beyond the program expenses, you have to think a lot before deciding a plan to your Board of members for putting yourself on salary. It’s the duty of the Board’s to hire and keep an eye on the Executive Director, and the Board must agree on any plan for a nonprofit salary including your payroll.
The best time to start deciding on a salary for yourself is when your young organization generates revenue beside the expenses of programs regularly during the period of six-months. Don’t miss out! Check our previously published article on Desired Pay Salary.
Once you reach that date, you are ready to bring a plan to the Board for your organization’s first nonprofit salary. When you reach this goal, it will be helpful to have a professional human resources on your board members or keep somebody to help in an advisory situation. Start working to enlist somebody as an HR professional if you do not have one already.
Hire a consultant if necessary (hey, we can help with this!). There are so many ins and outs to hiring and maintaining a staff, many with legal considerations that you want to be sure to get this right.
How Much Should be the Salary of a Nonprofit Founding Director ?
Do research on what other Executive Directors of small nonprofits in your area are getting paid. You can search for it in job advertisements or ask around. After knowing the going rate, you can start deciding about how much you want to pay yourself.
Old and huge, established non profit organizations pay their Executive Director a good salary of six figures. But in small non profit organizations, $50,000 to $65,000 is usually considered to be full-time salary.
The number may seem huge when you think about having to consistently raise at least $50,000 a year just to cover your nonprofit salary. Therefore as a small, new and growing organization, it’s best to start on small figures. Choose an amount for paying yourself that you are able to cover then increase it as the revenue increases.
Several Ways to Get Paid
If you don’t want to take the decision of paying yourself a payroll and it is a very big thing for you right now, below are some basic steps you can take. First, make sure that you are able to repay all your expenditures of the nonprofit.
Is the nonprofit paying for at least a portion of your bills for cell phone and internet service? How about the laptop you purchased for work? If your work needs travel, are you able to compensate for the expenses of gas and servicing of your car. Consider all of your personal expenses and make a process to get a refund. Have you seen it yet? Check our previously published article on Do Salaried Employees get overtime pay?
You should keep two different checkbooks – one for your personal use and one for the use of your non profit organization. Maintain both the checkbooks according to your usage. If you paid for something on your personal credit card, then fill the reimbursement form, sign it and write a check to yourself from the account of the organization.
If the full-time salary that is reasonable for your area is $58,000, can your organization afford $29,000? If that is too steep, what about quarter-time? That would be $14,500, and your Board could include paid time off and, ideally, a healthcare stipend of at least $6,000.
What if Your Board Is Hesitant?
Sometimes Boards are unwilling to decide a salary for the Executive Director in the young growing non-profit organization.
Most often, they want to remain safe and secure and don’t want to extend themselves financially that much. Since you have been doing the work without taking any salary in the beginning, they will assume that you can just continue working for free in the future too.
Your Board will suggest you to wait up to the young organization has a cash reserves for minimum six-month and has all programs built out in advance and running smoothly, so they’re “ready.” That’s like waiting for the right time to have a baby. Will the time for such a life-changing decision ever be truly right?
A play-it-safe mindset will never get you from volunteer to salaried Executive Director. And if you don’t have the plan to pay the employees, your organization will be limited in growing.
But if you have big dreams that involve expanding services, you have to make a plan to pay yourself a nonprofit salary. For more information, check our previously published article on How to Ask for Your Desired Salary?
Put together a solid plan and get your Board on board with it. You should keep one of your Board members to help you in making the plan and ask them to help present it to the Board. You’ll get good results when you have someone from the board members
Frequently Asked Questions
Usually, charities do not pay tax on most types of income as long as they use the revenue for public welfare purposes.
The main benefit of being a not-for-profit organization is that there are fewer restrictions on the charitable work you can carry out.
You must apply to register your charity with the Charity Commission if either: its income will be at least £5,000 per year. it’s a charitable incorporated organization (CIO).
There is no Charity Commission fee to set up a UK charity but expect to pay about £1000 or more for someone to do it for you. To register a charitable trust or company you need income of £5000 or a grant offer of this amount.
Conclusion
To prepare your non profit organization for growth is important to encourage your work. The huge majority of volunteer Executive Directors can’t do their work without taking the salary for too long. Most organizations cannot fulfill their missions without paid staff.
Grow your program for fundraising in support of a strategic plan that needs paid employees, by doing this your organization can make a huge impact on the society and change many lives. Take a look on: What if a salaried employee works less than 40 hours?
