Closing the Nonprofit Compensation Gap with a Total Rewards Strategy

Charitable organizations operate under a structural constraint most employers do not face: Funder and donor scrutiny of administrative overhead limits what they can offer in salary. Most operating budgets simply were not built to support competitive wages, and there is rarely flexibility when salaries fall behind market average. This creates competition in the nonprofit workforce as employees may seek out other work opportunities with higher wages. In fact, compensation and benefits remain the primary driver of staff turnover in Canada’s charitable sector.¹ Despite being among Canada’s most educated workers, nonprofit employees consistently earn less than their counterparts in other sectors.²

Replacing a single employee can cost between 50% and 200% of their annual salary once recruiting, onboarding and lost productivity are factored in.³ Rising benefits costs add another layer of pressure, with employers bracing for increases of 8% to 10% in group plan costs in 2026, among the steepest jumps in years.⁴ When rising costs cannot be offset by budget increases or shifted to employees, the gap between what staff need and what the organization can offer will continue to widen.

The opportunity hiding in total rewards

Nonprofits that look past salary alone and build total rewards strategies that connect pay, benefits and perks into a single, deliberate approach will have a better chance of winning the talent battle. Many nonprofits already strive to offer adequate nonprofit employee benefits; the gap is usually in how those benefits are structured, personalized and communicated. Organizations that offer flexible, personalized benefits strategies consistently report stronger retention and lower turnover costs than those relying on one-size-fits-all approaches.⁵

A nonprofit’s mission is also an asset that belongs to that strategy. Conveying how an employee’s daily work contributes to a larger cause, consistently and across every communication channel, can be as much a retention tool as a benefits upgrade.

Building a nonprofit total rewards strategy that closes the gap

Nonprofits should focus on a few specific moves to gain traction:

• Analyze benefits around real needs — A workforce demographics analysis can reveal what staff value, allowing organizations to tailor existing benefits rather than add new costs.
• Diversify funding sources — A human capital endowment, built through donor and corporate partnerships, creates a dedicated reserve for wages and benefits, delivering a sustainable boost that does not depend on annual budget cycles.
• Expand health plan flexibility — Health Spending Accounts (HSAs) and cost-plus arrangements can supplement provincial coverage and lower costs while preserving meaningful options, particularly for organizations with part-time or variable-hour staff.
• Strengthen retirement plan design — Group Registered Retirement Savings Plan (RRSP) and defined contribution registered pension plan (DC RPP) features, such as immediate eligibility, generous employer contributions and full vesting, rank among the strongest retention tools nonprofits can offer. For executive and management-level staff, retirement compensation arrangements (RCAs) can further strengthen total rewards.
• Add tax-advantaged savings tools — Group RRSPs and HSAs give employees meaningful tax advantages, helping stretch compensation further without significantly increasing costs.
• Modernize communication — Delivering benefits information in the right format and through the right channel matters as much as the offering itself.

None of these actions require a major budget increase, but each requires intentional strategy and a willingness to offer what already exists in a way that resonates with today’s workforce. A total rewards strategy built for long-term nonprofit workforce sustainability protects what nonprofits cannot easily replace: an experienced, mission-aligned team.

Connect with HUB International’s nonprofit and employee benefits specialists to learn more about building a total rewards strategy that supports your workforce.

Sources

1. Charity Insights Canada Project (CICP), “Understanding the HR Crisis Facing Charities,” July 3, 2025.
2. Imagine Canada, “People First: A Portrait of Canada’s Nonprofit Workforce,” accessed August 20, 2026.
3. GoKlaim, “Employee Retention Strategies Canada: How Flexible Benefits Reduce Turnover in 2026,” June 22, 2026.
4. Benefits by Design, “2026 Group Insurance Forecast and Outlook,” February 3, 2026.
5. Wellbytes Inc., “Improving Employee Retention with Benefits: What Works in Canada,” July 24, 2025.