It can be vexing for business leaders, especially in non-profit organizations, to figure out what to do when it comes to annual salary budget planning.
Budget 3.2%. Article concluded. Thank you for reading.
Wow, I wish my answer was that concise. Unfortunately, the question is not “how much should I budget,” but should be “how do I attract and retain great talent.”
Because it’s a complicated topic, I have partnered with Michael Maciekowich, National Director of Astron Solutions, a 25-year-old compensation consultancy, to complement my HR experience (over 17 years supporting non-profits) to provide a comprehensive recommendation in 2000 words or less. In this two-part series,this first article addresses what the landscape looks like and what leaders need to keep in mind. In the next article that will be posted tomorrow, we will outline actionable recommendations, both compensation-related and not, for the reader to consider.
Low unemployment and talent shortage
Let’s begin with the easy one: The national unemployment rate was recently reported to be 3.8%. In an article written by the International Monetary Fund, management consulting firm Korn Ferry estimated that there will be a global shortage of more than 85 million tech workers. You may not compete globally for talent but if the larger companies can’t get enough talent, here or abroad, they are going to compete even harder with you.
Pay transparency and changes to changes to overtime pay
There are pay transparency laws on the books or pending in eight states (CA, CO, CT, IL, MD, NV, RI, WA) and a few cities in New York and Ohio. Why does this matter? Organizations need to get their house in order, ensuring equity in their organizations and be prepared to show their cards to the world. More on this in our second installment.
The other issue is the upcoming changes to the overtime rule. On April 23rd, the Department of Labor announced “effective July 1, 2024, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase to $58,656 on Jan. 1, 2025.” This could have the effect of not only increasing the pay of your lowest paid salaried staff but also cascading increases upward to positions already paid near these amounts.
Competition
Since the pandemic era stimulus has ended, you no longer have to compete with unemployment checks for talent. Now companies just have to compete with each other, and competition is lively. We didn’t look at just one survey; we looked at numerous surveys and articles, and they all say the same thing – your competition has finding and poaching top talent on their minds. The AAIM Employer Association, a 2200+ company/member employer association, conducted a survey where 91% of those employers surveyed had 499 employees or fewer. The results showed that the top two concerns of the surveyed executives were talent acquisition and talent retention with TA having nearly double the response of any of the other top-5 responses. The US Chamber of Commerce listed talent as the #4 issue with small and medium-sized businesses. Forbes, in an article published earlier this year, stated that strong labor markets were the second largest business issue this year. Our final data point is a survey asking 197 CEOs their top challenges and top priorities for 2024. The results, as listed on chiefexecutive.net, show that the top three challenges are: inflation, retaining & engaging employees, and recruiting & training employees. Their #1 and #5 priorities are retaining & engaging employees and recruiting & training employees, respectively.
What does this all mean? Your competition is both worried and taking this seriously; your ability to recruit and retain great people will be even harder.
Here’s one last point in our summary of the landscape. According to Astron Solutions, the total compensation budgets for non-profits for 2024 are between 4% and 5% with between 3-4% going to base salaries with 1-2% reserved for market and equity adjustments.
Is your head spinning yet? No judgment here. Take some time and let all this sink in overnight. Come back tomorrow for part two where we discuss how with compensation- and non-compensation-related recommendations for your consideration.
About the Authors
Michael F. Maciekowich is a National Director for Astron Solutions. His areas of expertise include the development, design, and implementation of executive, physician, and employee base pay, short and long term incentive programs, sales incentive programs and performance management systems in all industries. Michael has over forty years of consulting and industry compensation experience. Michael received bachelor’s degrees in political science and philosophy and a master’s degree in industrial relations from the Loyola University of Chicago. michaelm@astronsolutions.com 917-714-0317
Brady Young is the founder of Thrive Coaching and Consulting which provides fractional HR leadership to mid-sized businesses and talent consulting and coaching services to businesses of all sizes. Thrive focuses on the nonprofit and life sciences sectors. Contact brady@thrivecoachingconsulting.com for more information.
