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Compensation Expense Ratio

Source: R/get-expenses-compensation-ratio.R
get_expenses_compensation_ratio.Rd

Total compensation and employee-related expenses as a share of total functional expenses.

Formula:

expenses_compensation = ( officer_comp + disqualified_comp + other_salaries
                          + pension_contributions + other_employee_benefits
                          + payroll_taxes ) / total_expenses

Definitional Range

Bounded [0, 1]. Most service-delivery nonprofits fall in the [0.50, 0.85] range. Grant-making organizations may show ratios below 0.20.

Benchmarks and rules of thumb

  • No universal benchmark – labor intensity varies fundamentally by mission type.

  • Human services, health, and education nonprofits typically show ratios above 0.60; grant-making organizations may show ratios below 0.30.

  • A sharp year-over-year increase may indicate revenue contraction rather than compensation growth.

Calculated For: 990 filers only.

Usage

get_expenses_compensation_ratio( df,
  officer_comp           = "F9_09_EXP_COMP_DTK_TOT",
  disqualified_comp      = "F9_09_EXP_COMP_DSQ_PERS_TOT",
  other_salaries         = "F9_09_EXP_OTH_SAL_WAGE_TOT",
  pension_contributions  = "F9_09_EXP_PENSION_CONTR_TOT",
  other_employee_benefits = "F9_09_EXP_OTH_EMPL_BEN_TOT",
  payroll_taxes          = "F9_09_EXP_PAYROLL_TAX_TOT",
  total_expenses         = "F9_09_EXP_TOT_TOT",
  winsorize  = 0.98 ,
  range     = "zo",
  sanitize   = TRUE,
  summarize  = FALSE )

Arguments

df

A data.frame containing the fields required for computing the metric.

officer_comp

Compensation of current officers, directors, and key employees (total).

disqualified_comp

Compensation of disqualified persons (total).

other_salaries

Other salaries and wages (total).

pension_contributions

Pension plan accruals and contributions (total).

other_employee_benefits

Other employee benefits (total).

payroll_taxes

Payroll taxes (total).

total_expenses

Total functional expenses.

winsorize

Winsorization proportion between 0 and 1 (default 0.98).

range

Character string specifying the theoretical range of the ratio, used to set winsorization bounds. Default "zo". Options: "np" (negative to positive), "zp" (zero to positive), "zo" (zero to one), "nz" (negative to zero), or a custom "lo;hi" pair (e.g. "0;10").

sanitize

Logical (default TRUE).

summarize

Logical (default FALSE).

Value

The original data.frame with four new columns:

  • expenses_compensation (raw ratio)

  • expenses_compensation_w (winsorized)

  • expenses_compensation_z (z-score)

  • expenses_compensation_p (percentile rank, 1-100)

Details

Primary uses and key insights

The compensation expense ratio measures the share of total functional expenses devoted to all forms of employee compensation: salaries, benefits, payroll taxes, and pension contributions. For most service-delivering nonprofits this is the largest single expense category (60-80\ indicator of labor intensity and human capital investment.

Formula variations and their sources

Sum of six Part IX compensation fields (lines 5-10, Column A) / total expenses (line 25A): officer compensation, disqualified person compensation, other salaries, pension contributions, other employee benefits, and payroll taxes.

Canonical citations

  • Frumkin, P. & Keating, E.K. (2001). The price of doing good. Policy and Society, 20(4), 94-112.

  • Leete, L. (2001). Whither the nonprofit wage differential? Journal of Labor Economics, 19(1), 136-170.

Variables used:

  • F9_09_EXP_COMP_DTK_TOT: Officer/director compensation (officer_comp)

  • F9_09_EXP_COMP_DSQ_PERS_TOT: Disqualified person compensation (disqualified_comp)

  • F9_09_EXP_OTH_SAL_WAGE_TOT: Other salaries and wages (other_salaries)

  • F9_09_EXP_PENSION_CONTR_TOT: Pension contributions (pension_contributions)

  • F9_09_EXP_OTH_EMPL_BEN_TOT: Other employee benefits (other_employee_benefits)

  • F9_09_EXP_PAYROLL_TAX_TOT: Payroll taxes (payroll_taxes)

  • F9_09_EXP_TOT_TOT: Total functional expenses (total_expenses)

Variables used:

  • F9_09_EXP_COMP_DTK_TOT: Officer/director compensation (officer_comp)

  • F9_09_EXP_COMP_DSQ_PERS_TOT: Disqualified person compensation (disqualified_comp)

  • F9_09_EXP_OTH_SAL_WAGE_TOT: Other salaries and wages (other_salaries)

  • F9_09_EXP_PENSION_CONTR_TOT: Pension contributions (pension_contributions)

  • F9_09_EXP_OTH_EMPL_BEN_TOT: Other employee benefits (other_employee_benefits)

  • F9_09_EXP_PAYROLL_TAX_TOT: Payroll taxes (payroll_taxes)

  • F9_09_EXP_TOT_TOT: Total functional expenses (total_expenses)

Examples

library( fiscal )
data( dat10k )
d <- get_expenses_compensation_ratio( df = dat10k )
#> Error in resolve_col(dt, officer_comp): None of the specified columns were found in the data: F9_09_EXP_COMP_DTK_TOT
head( d[ , c( "expenses_compensation", "expenses_compensation_w", "expenses_compensation_z", "expenses_compensation_p" ) ] )
#> Error: object 'd' not found