Many nonprofit organizations don’t have formal compensation plans – they just continue increasing (maybe) the salaries of their staff based on the CPI or other index or use the "going rate" for salary increases each year. Benefits are changed when there is either financial ability to add them, or a financial need to decrease them. Many people have experienced a reduction in the amount of health care benefits provided by their nonprofit employers due to the rapid increase in health care insurance costs over the past few years.

However, a carefully thought-out compensation and benefit plan is essential to hiring and retaining a qualified work force. And as the organization develops, changes can be made to the plan in a logical manner that addresses all employees and situations, thereby avoiding individualizing salary and benefit decisions which can lead to at best, bad feelings, and at worst, lawsuits based on discrimination issues.

Compensation plans can be very simple, or quite complex, depending on the size of the organization and the breadth of programs. Some organizations create different plans for executives and upper level managers, and some have systems in which the variations are based only on longevity or full-time/part-time status.