Determining pay is tricky business—there are many factors to consider and it’s a topic that makes many people squirm, even on the best of days.

In the traditional model of setting pay, organizations would need to consider a salary level that would attract, retain and motivate staff. A pay inquiry by the UK's National Council for Voluntary Organisations (NCVO) takes the view that emphasis should be put on attracting and retaining staff, as they are already motivated to work for a cause.

The NCVO sets out these key steps for getting pay right:

Establish a remuneration committee

The remuneration committee is generally a sub-committee of the board, one that can engage in detailed discussion. Inviting external experts to such a discussion is a good option because they can objectively weigh in with subject-matter expertise.   

Whose pay are you setting?

The remuneration committee should focus on setting the pay for a defined group of the most senior managers. It should then be up to those managers to determine the pay for the rest of the employees. These processes will likely be separate, but each will need to be conscious of the other’s relationships. It would be difficult to defend a pay raise for senior managers that was not extended to other employees.

Have a clear pay policy

A policy will avoid confusion (or worse, resentment) over pay. It should outline all the factors taken into account to set pay, including comparators and benchmarks.

Communicate what you do and why

This should be done both externally and internally. The inquiry revealed that charities could maintain trust in the sector by being transparent about who gets paid what and why. The bottom line is that transparency engenders trust.

Money can't buy happiness

Low cost or non-monetary rewards can be part of the total compensation package—and can certainly be more affordable. Flexible hours, development opportunities, generous leaves of absences, donuts every Friday—there are hundreds of ways to increase employee morale without going broke.

For more information, check out NCVO’s pay inquiry here. Thanks to Nonprofit Newswire for highlighting the original article.