Each year, not-for-profit organizations face increasing complexity when setting employee and executive compensation budgets. Finance leaders often rely on published salary surveys to guide planning decisions; however, these surveys can underestimate actual market pressures, especially for leadership roles competing with the private sector.
By combining historical wage trends with current labor market dynamics and sector-specific governance considerations, not-for-profits can develop compensation strategies that are both competitive and defensible. In this context, salary planning extends beyond simple budgeting; it becomes a strategic investment in leadership continuity, operational stability, and mission delivery.
Competitive and well-structured pay programs reduce costly turnover, preserve institutional knowledge, and sustain organizational effectiveness. Replacement costs can range from 20% to more than 200% of an employee’s salary, with more significant disruption in executive roles. As scrutiny around compensation grows, especially for senior positions, thoughtful planning becomes crucial.
To support organizations in managing these challenges, we conducted a detailed analysis of the 2026 compensation outlook for not-for-profit employers.
Current Market Outlook for Not-for-Profit Compensation
Based on our analysis, we recommend the following planning assumptions for 2026:
- Salary structure adjustment: 2.6%
- Salary increase budget: 4.0%
These recommendations improve competitive positioning for staff roles while providing flexibility for executive and critical-skill positions where market pressure is highest.
Understanding the Salary Structure Adjustment
Maintaining current and competitive salary structures is foundational for compliance and talent management for not-for-profit organizations. A well-designed structure supports internal fairness, reduces compression, and provides a strong foundation for equitable compensation decisions.
Our recommended 2.6% salary adjustment reflects:
- Upward wage pressure: The U.S. Bureau of Labor Statistics (BLS) Employment Cost Index reported 3.6% wage growth for the 12 months ending June 2025.
- Ongoing talent competition: According to the BLS Job Openings and Labor Turnover Survey, job openings remain roughly equal to the number of unemployed individuals, increasing pressure for qualified talent.
- Survey benchmarks: The WorldatWork 2025–2026 Salary Budget Survey forecasts an average increase of 2.4%, which is conservative compared to broader labor market indicators, especially for leadership and specialized roles.
The 2.6% recommendation modestly exceeds survey averages while remaining consistent with overall wage growth. Not-for-profit organizations should perform thorough market reviews every three to five years, especially for executive, finance, advancement, clinical, and technology positions that may vary from general market movement.
Not-for-Profit Salary Increase Budgets and Executive Pay Considerations
Salary-increase budgets set the overall pool for individual pay adjustments. Not-for-profit budgets must support retention and growth while maintaining fiscal responsibility and public accountability.
Our recommended 4.0% increase in budget reflects:
- Market forecasts: The WorldatWork reports planned increases averaging 3.8%.
- Sustained incumbent wage growth: Atlanta Federal Reserve Wage Growth Tracker shows 4.2% wage growth for job stayers.
- Progression and compression management: Budgets should exceed structure movement by approximately 140 basis points (1.4%) to support career progression and reduce pay compression.
Not-for-Profit Executive Compensation Trends and Considerations
Executive pay planning often requires additional nuance. Not-for-profits face heightened competition from private sector companies, healthcare organizations, and hybrid for-profit affiliates, particularly for presidents, CEOs, CFOs, and operational leaders.
Key 2026 executive compensation trends include:
- Targeted base salary adjustments: Differentiated increases address market gaps, retention risk, and role complexity.
- Incentive emphasis: Organizations increasingly expand annual and long-term incentives to remain competitive and align pay with measurable performance.
- Governance scrutiny: Boards and compensation committees emphasize documentation, benchmarking, and compliance with IRS rules and Form 990 disclosure requirements.
- Multi-entity coordination: Executives serving across foundations, affiliates, and for-profit subsidiaries require careful compensation alignment to ensure transparency and defensibility.
While our 4.0% recommendation aligns with market trends, organizations should evaluate internal equity, executive retention risk, and external competitiveness to determine if differentiated adjustments are necessary for senior leadership.
Monitoring Market and Regulatory Trends
Heading into 2026, the labor market remains sensitive to economic shifts. Not-for-profits should actively monitor:
- Government wage and employment data
- Compensation survey updates
- Turnover and recruitment challenges
- Internal compression and pay equity signals
Regular reviews help organizations stay agile and responsive while upholding governance and fiduciary standards. CBIZ provides ongoing market updates and sector-specific insights to support informed decision-making year-round.
A Strategic Approach to Compensation Planning
Effective compensation programs extend beyond annual budgeting exercises. Success depends on aligning compensation philosophy, market benchmarking, structure design, incentive strategy, and disciplined pay administration.
Misalignment can create material risks, including turnover, difficulties in executive recruitment, pay compression, and regulatory issues. Well-designed programs support leadership stability, workforce engagement, and long-term mission sustainability.
CBIZ works with not-for-profit boards, compensation committees, CFOs, and HR leaders to improve compensation governance and planning. Our goal is to help organizations make competitive, compliant, and strategically aligned compensation decisions that promote fiscal responsibility and organizational impact.
Contact a member of our team today to discuss how CBIZ can support your 2026 compensation planning.
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