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Can We Pay a Director to Work for Us

October 3, 2025 by Michael Simkins

It’s a common question for small nonprofits: if one of our board members has the skills we need, can we pay them to also serve as our executive director, consultant, or contractor?

The short answer is yes — but with important safeguards.

  • Separate roles: Payment cannot be for the person’s work as a director. Board service itself is almost always expected to be voluntary. But if a director is also providing staff or contractor services — for example, serving as CEO, bookkeeper, or program manager — they may be compensated for that work.
  • Conflict-of-interest rules apply: The director must not participate in board discussions or votes about their own hiring, compensation, or contract. The rest of the board should handle those decisions independently.
  • Document everything: Board minutes should record the disclosure of the dual role, the director’s recusal, and the process the board used to determine that compensation is fair and reasonable. Looking at comparable salaries or fees in your area helps show the board acted responsibly.
  • Think about optics: Even if legal, paying a board member can raise questions from funders or the community. Transparency, clear communication, and good governance practices go a long way toward building trust.

✔ Bottom line: Your nonprofit can pay a director for separate staff or consultant work, but you need to handle conflicts of interest carefully and document the process. Done right, it’s both legal and acceptable.

⚖ Employment law caveat: In addition to nonprofit governance rules, standard employment laws still apply. For example, in California it’s often difficult to classify someone as an independent contractor if they are carrying out core functions of the organization. In many cases, paying a director for staff-level work must be done through regular payroll as an employee, with all the usual tax and labor law compliance.


This article is provided for general educational purposes only and is not legal advice. For specific guidance, consult with a qualified attorney or HR professional familiar with your organization’s circumstances.


Setting CEO/ED Compensation: What Boards Should Know for 2026

September 7, 2025 by Michael Simkins

Every year, nonprofit boards face the responsibility of reviewing the salary of their CEO or Executive Director. A thoughtful approach ensures fairness, compliance, and organizational sustainability. Spokes’ new guidance sheet highlights six essentials for boards: staying compliant with IRS rules, reviewing market data, assessing organizational health, evaluating leadership performance, supporting retention, and using a clear, documented process.

To complement this, we’ve prepared a companion snapshot of regional inflation and San Luis Obispo County cost-of-living data. With CPI currently around 3% and local housing costs more than double the national average, boards have the context they need to consider reasonable cost-of-living adjustments (COLA). Together, these resources give boards a transparent, data-driven framework for making confident salary decisions.

Download the full 2-page guidance sheet here.

Spokes members also have access to a regional compensation survey. Log into your Spokes account to request access.

Can the Executive Committee determine the ED’s pay?

January 14, 2024 by Michael Simkins

Our bylaws state that the Executive Committee has full authority/responsibility to review the CEO’s performance and to set compensation, and that the Board “shall be informed” of the Committee’s decision. Is this OK?

Technically, the answer is yes—assuming that all members of the Executive Committee are, in fact, directors. Even so, the board as a whole still has responsibility for the process and outcome.

That said, it’s generally recommended to have a transparent and fair process for determining the executive director’s salary. While the executive committee certainly may play a role in salary discussions, it’s often advisable to establish a compensation committee or involve the full board in the decision-making process.

Having a broader group involved can bring diverse perspectives and ensure a more objective approach to determining the executive director’s salary. This approach is in line with principles of good governance, accountability, and transparency, which are important for the credibility and effectiveness of nonprofit organizations.

Two things to keep in mind:

  • Although the IRS does not provide specific dollar amounts or an acceptable range of compensation levels, they stipulate that compensation must be reasonable and not excessive.“Reasonable” is defined as the value that would ordinarily be paid for like services by like enterprises under like circumstances.
  • Nonprofits filing IRS Form 990 must describe the process they use to approve executive compensation as part of the nonprofit’s responses on the annual return, IRS Form 990, Part VI, Section B, line 15.

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DISCLAIMER: Spokes offers informed advice and recommendations, not professional counsel. Blog content is current as of the date shown. Individual posts are not necessarily updated, so please confirm the accuracy of the information, especially of older posts.

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