Motion Concerning Staff Compensation and Contractual Parameters

[floeff]

Motion Concerning Staff Compensation and Contractual Parameters

Summary

TDF needs to regularly review agreements with employees and contractors. The board discusses this matter.

Discussion

• The Board has been made aware from both the Executive Director as well as some members of staff that the compensation and other contractual parameters of several team members are significantly below market standards.
• One member of staff refused to sign a prolongation of their contract until a better compensation has been agreed. Unhappiness has been expressed by several other members of staff, some consider to resign due to the conditions.
• The Board is aware that, contrary to what was communicated in the past, members of staff can and should be paid market rates comparable to for-profit organizations of our size and complexity. Legal counsel informed the board already that courts confirmed that the same remuneration can be paid to employees in non-profit organizations as they paid in the “regular” market by commercial entities. Payment should also be made in this way, as there is competition for the best employees.
• Tax advise has reached out this year to the Executive Director, informing them that compensations should be reviewed and adjusted on an annual basis to match market standards, noting some had not been adjusted in years.
• The Board is also aware the last increase of compensation took place in August 2022 and was less than the inflation at that time.
• The Board is furthermore aware that some employees paid thousands of Euros for work utilities themselves over the past years.
• It is expected, given an international team and 16 people, the process will take time. Improvements therefore will happen one by one.
• Executive Director should proactively communicate to the team, to inform them about the process and understand their requests.

Proposed Motion

RESOLVED that the Board tasks its Executive Director to work with existing legal counsel and tax advise to review compensations and contractual parameters for members of staff, to make proposals to the board. Reserve a budget of 5.000 € for needed counsel.

Change history

Date - Change - By
14-Mar-2024 - Removed some confidential bits - Florian Effenberger
04-Mar-2024 - Created - Florian Effenberger

The motion has been approved in the board’s meeting of March 11, 2024 as follows:
(Minutes of this meeting will be published soon.)

Eliane Domingos 0
Simon Phipps +1
Eike Rathke +1
Sophie Gautier 0
László Németh +1
Italo Vignoli 0
Bjoern Michaelsen +1

Deputies:
Paolo Vecchi +1
Osvaldo Gervasi +1
Mike Saunders 0

[EyalRozenberg]

@floeff

Legal counsel informed the board already that courts confirmed that the same remuneration can be paid to employees in non-profit organizations as they paid in the “regular” market by commercial entities.

Had anyone seriously argued that there was a legal problem with paying “regular” salaries/compensation? Weird.

@floeff

contrary to what was communicated in the past

Who communicated this and when?

@floeff

Tax advise has reached out this year to the Executive Director

Who reached out? I think this is mistyped.

@floeff

The Board is furthermore aware that some employees paid thousands of Euros for work utilities themselves over the past years.

The board should consider an automatic, periodic, inflation/cost-of-living adjustment mechanism for all employees - independently of any other adjustments due to change of role, performance, etc. Of course I realize this is non-trivial considering how different employees and contractors live in different places in the world, so the question of which index to follow is not trivial.

@floeff

It is expected, given an international team and 16 people, the process will take time.

If this is the case, the board should consider advancing a certain sum, based on some cocktail-napkin estimate of the typical raise, so that the employees don’t continue to bear the full brunt of the delay. This is doubly appropriate considering we are currently sitting on a relatively large pile of money (e.g. due to the holdup with the tenders).

[floeff]

Hello Eyal,

@EyalRozenberg

Had anyone seriously argued that there was a legal problem with paying “regular” salaries/compensation? Weird.

@EyalRozenberg

Who communicated this and when?

in the past, it was discussed that TDF has to pay some sort of “charity rate” with lower salaries than the usual market rate, because we are a charity. However, while as a nonprofit TDF cannot excessively overpay, paying a market rate is what it can absolutely do.

@EyalRozenberg

Who reached out? I think this is mistyped.

TDF’s tax advise has informed me that the compensations should be reviewed annually. He noted that several compensations have not been adjusted in quite a long time and that the increases over the years have been rather low.

@EyalRozenberg

The board should consider an automatic, periodic, inflation/cost-of-living adjustment mechanism for all employees - independently of any other adjustments due to change of role, performance, etc. Of course I realize this is non-trivial considering how different employees and contractors live in different places in the world, so the question of which index to follow is not trivial.

Some companies I know take the index from the country of employment, i.e. where the employee is based.

Florian

[EyalRozenberg]

@floeff

TDF’s tax advise

this phrase is grammatically invalid… I assume you mean the TDF’s tax advisor?

@floeff

Some companies I know take the index from the country of employment, i.e. where the employee is based.

That could work. Although… that begs a question: What currency do we pay employees in? Is it all EUR? Currency of their country of employment? Country of residence? A mix of currencies based on the donations we get?

[floeff]

@EyalRozenberg

this phrase is grammatically invalid… I assume you mean the TDF’s tax advisor?

I heard the other phrase also, but just to confirm, it’s the tax advisor, tax consultant, who reached out indeed.

@EyalRozenberg

That could work. Although… that begs a question: What currency do we pay employees in? Is it all EUR? Currency of their country of employment? Country of residence? A mix of currencies based on the donations we get?

While I can’t comment on each contract in detail, it’s a fair assumption that people usually get paid in the currency of the country they’re employed in.

[thb]

Hi y’all,

the gist of this motion is great to see (i.e. having contracts and compensation reviewed, and if needed adjusted). The discussion itself though seems to contain a number of inaccuracies, which hopefully did not materially affect the decision-making:

1. I don’t recall a single budget year in the past two boards, where there was no across-the-board annual compensation increase in the budget. For 2022, if my recollection is accurate, it was 10% globally (plus individual improvements, sometimes monetary, sometimes other parameters like working hours or vacation). In 2023, it was 6% IIRC, though unfortunately the board was deadlocked over other budget parameters for the longest time.
2. In all cases, the executive director was handling the details of this; I recall a similar discussion as the one here (with the suggestion to iteratively go over all the contracts) took place in May 2023
3. As a charity, TDF has to be very careful not to overpay. TTBOMK, this fact has not changed over the years; of course what exactly constitute fair market prices might not always be trivial to determine. If tax advise can help to inch closer to this absolute cap, while still maintaining a sensible margin for error, that should be applauded.

Best, Thorsten

[Sweetshark]

Hi @floeff ,

@floeff

Some companies I know take the index from the country of employment, i.e. where the employee is based.

Do you have a reference showing this to be established and accepted practice for German NGOs that we can put in the archive on this? I was not able to find a reassuring document wrt that assumption so far.

Best Regards,

Bjoern

[floeff]

Hi Bjoern,

@Sweetshark

@floeff

Some companies I know take the index from the country of employment, i.e. where the employee is based.

Do you have a reference showing this to be established and accepted practice for German NGOs that we can put in the archive on this? I was not able to find a reassuring document wrt that assumption so far.

this is part of the research that currently takes place indeed. When it comes to companies that hire worldwide I know several some indeed chose to

• pay in local currency, to avoid conversion rate issues, and
• use the local inflation rate as basis for compensating the inflation

Florian

[Sweetshark]

Hi @floeff, Hi Board,

maybe tax advise should be asked to provide a written statement to the Board on:

• a confirmation on if a team members compensation is reasonable in the status quo for an NGO (for each team member) and what the “reasonable” range is
• how reasonable compensation outside of Germany is evaluated
• this should be a non-optional part for each hiring proposal put as a motion to the board

This will ease the task of evaluating salaries for them too.

Of course, this suggestion comes late. Maybe the motion can be amended?

Best,

Bjoern

[EyalRozenberg]

@Sweetshark

a confirmation on if a team members compensation is reasonable in the status quo for an NGO (for each team member) and what the “reasonable” range is

This seems more like a socio-political question than a tax question… also compensation has non-monetary or semi-monetary aspects like insurance, so again not clear if a tax advisor can effectively weigh in on that.

@Sweetshark

how reasonable compensation outside of Germany is evaluated

This seems more of a philosophical question than a tax question…

@Sweetshark

this should be a non-optional part for each hiring proposal put as a motion to the board

So, that is the problem to be solved. I take it, that there are situations where BoD member see a potential employment offer, with estimated total cost X EUR/annum, and think “Is this high? Is this low? How can I tell if I don’t have a range?” and I can definitely empathize with being in that situation, because as an employee, when you need to name your requested salary, you’re stuck with a similar, albeit simpler, conundrum.

So, I would refine your suggestion into two steps: First, a sort of a model of what the compensation, in its various aspects, should reflect; and into that model you would then plug in more concrete statistics which may be available regarding compensation distributions. But also focus on other aspects on the contract, unless everything is absolutely uniform for all TDF employees.