Do Nonprofits Give Bonuses to High-Performing Employees?

Posted by Molly Schar Aug 24, 2009

A reader writes ...

I've been looking on the internet for policies regarding monetary rewards for nonprofit employees who develop innovative technologies or strategies that advance the mission of the organization. I haven't found any yet. Is this even acceptable in the nonprofit world??

It certainly is acceptable in the nonprofit world to reward employees for exceptional performance. What is generally not considered okay is awarding employees on a commission basis – like awarding a grantwriter 10% of funding secured, for example. (That particular example runs afoul of the Association of Fundraising Professionals code of ethics.)

A performance bonus (which is what I think you're talking about) should also not raise the employee's salary above the standard of reasonableness. Check out what the IRS has to say about reasonable compensation.

You might also be interested to hear what Michael Smith of Smith Recruiting has to say about weighing the advantages of performance reviews versus a bonus system. Keep clicking to get to his example scorecard.

Keep those questions coming! Email Molly Schar at nonprofitmanagement@suite101.com.