People Blog & Insights

2023 COLA/Salary Increase Considerations for Nonprofit Organizations

As the new year approaches, we know that your organization – and most other organizations – are preparing and finalizing 2023 budgets.  A big piece of this work is determining salary/payroll budgets and making decisions on pay increases for your staff.  As our country experiences the highest inflation in 40 years, we know that organizations are contending with what are appropriate and feasible levels of pay increases for this upcoming year.

Traditionally, annual salary budgets and staff adjustments have averaged around 3%.  In the past, depending on the type of organization you are, your current organizational life cycle (new, emerging, growing, or stable), your size and your budget, organizations have varied in their ability to increase annual pay around this amount.  Now, with inflation in the high single digits for most regions – double digits in some places – the long-time status quo is flying out the window.

Across organizations, for 2023, we are seeing projected salary increases – or cost of living adjustments (COLA) – between 3-5%, targeting around 4% on average.  We recognize that these projections are way less than inflation growth and your staff is likely to have concerns that pay increases in this range virtually represent a pay “decrease” given their actual increases in costs of living expenses.  We recommend the following to manage your increases for the new year:

  • If possible, include an increase of 3-5% in your payroll budgets for 2023. Your organization, of course, can decide to pay above or below this range based on your organization’s compensation philosophy and financial feasibility.
  • Consider equity in the distribution of these increases across your staff. Typically, your lower paid staff feel the brunt of our economy more severely, so you might consider higher increases for them and lower for leadership or standard flat dollar amount raises that represent a higher increase for lower paid staff.  Of course, an across-the-board percent increase or merit-based raises that are tied to performance are appropriate in many instances as well.
  • Be transparent with staff about the organization’s decision on increases – what went into the decision, the outcome and impact it will have on staff, and any future plans to do other types of rewards. Acknowledge how inflation is outpacing the pay increases and consider other non-financial ways that your organization can show staff that they are valued (e.g., year end time off, growth and development opportunities in the new year, new or evolved benefits, etc.).

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