Compensation decisions are market driven for the head and the board. Even so, there are many ways to craft agreements to satisfy the financial and significant quantitative factors and requirements of a total compensation package.
Conversely, the nation is now focused on excessive compensation in the not-for-profit sector, which requires validation. A process is required to preclude unfair, inadequate and indefensible compensation.
Three Pillars of Compensation
A fair compensation package is structured around three distinct financial pillars:
The First Pillar is salary. Salary is determined by supply and demand as well as demographics, geography and the needs of the individual and school or institution.
The Second Pillar consists of bonuses and other guaranteed or discretionary entitlements such as cars, insurance, tuition, sabbaticals et al.
The Third Pillar is deferred compensation, of which there are two categories:
Qualified: Government tax code approved 403(b), 457(b) and other plans.
Nonqualified: Custom designed and tax-deferred compensation strategies. Typically, these are structured to reward the head of the school or institution for a job well done or encourage him or her to remain with the institution.
A fair compensation and benefits package impacts head, faculty and staff pay levels.
Peter H. Calfee
Peter H. Calfee, CPA, CFP, CLU, AEP, MBA, is President and Owner of Calfee Financial Advisors, Inc. Mr. Calfee is a past presenter at the National Association of Independent Schools Annual Conference, regional association and conference programs and speaks across the country on total compensation and contract issues for the leaders and staff of non-profit institutions and independent schools.