Sooner or later, someone on your board will suggest it. “We can’t afford a development director. What if we hire someone and pay them 15% of whatever they raise? If they don’t raise anything, we don’t pay anything.”
It sounds like the perfect deal for a small nonprofit. No salary risk, built-in motivation, and the fundraiser only gets paid when the organization gets paid.
I understand the appeal. But commission-based fundraising doesn’t remove the risk. It moves the risk onto your donors and your future revenue, and it pays for the wrong part of the job. If you’re a small shop trying to figure out how to add fundraising capacity without a big budget, this article explains why the percentage model tends to backfire and what you can do instead.
Why commission looks like a smart deal
The logic is easy to follow. Sales teams work on commission. Real estate agents work on commission. Why should fundraising be different?
The difference is what the money represents. A sales commission rewards a transaction between a company and a customer. A charitable gift is a donor’s decision to trust your mission. The donor is giving to the work, not paying for a service, and the person who asked is (in the donor’s mind) part of the organization, not a broker taking a cut.
There’s also a practical difference. Most sales happen in a defined window. The most valuable gifts in fundraising often don’t. A major gift, a bequest, or a donor who gives faithfully for fifteen years is the product of a relationship built over time, often by several people. Commission is built to reward the moment of the ask. Fundraising value mostly comes from everything before and after it.
What the profession’s ethics codes say
This isn’t only a matter of opinion. The major professional associations in fundraising have taken a clear position.
The Association of Fundraising Professionals Code of Ethical Standards says members shall “not accept compensation or enter into a contract that is based on a percentage of contributions” and shall not accept finder’s fees or contingent fees. AFP’s guidance on that standard also names some of the workarounds organizations try: calling a percentage a “bonus,” or paying a base salary with the rest tied to funds raised. Both still count.
The Grant Professionals Association’s code of ethics takes the same view for grant writers: members shall not accept or pay a finder’s fee, commission, or percentage compensation based on grants.
Two clarifications are worth making. First, percentage-based pay is generally not illegal. Independent Sector, writing about commission-free compensation, describes it as “certainly not a best practice” rather than unlawful. Second, rules about who has to register as a paid solicitor vary by state. I’m not a lawyer, so if you’re considering any contract where pay depends on money raised, check with your state’s charity regulator or an attorney first.
In practice, if you hire a fundraiser on commission, you’re likely to attract people who are either unaware of the profession’s standards or willing to set them aside. Neither is the person you want representing you to your best donors.
Commission pays for the gift, not the work behind it
Here’s where the model breaks down in practice. Imagine a youth mentoring program with a $600,000 budget. The board hires a contract fundraiser at 15% of gifts raised.
In the first few months, the fundraiser meets with a longtime donor who has given $10,000 a year for a decade. After one lunch, the donor increases to $25,000. Does the fundraiser earn 15% of $25,000 ($3,750) or 15% of the $15,000 increase ($2,250)? The donor’s loyalty was built by your executive director over ten years. The contract probably didn’t anticipate that question, and now you’re arguing about it.
Then a $100,000 bequest arrives from someone nobody on staff has ever met. Is that commissionable? If your contract says yes, you’ve just paid $15,000 for a gift no one asked for. If it says no, expect a difficult conversation.
Now look at the other end. Suppose the fundraiser has a strong year and brings in $500,000. At 15%, that’s $75,000, possibly more than the organization would have paid in salary for the same role. And to put it the other way around, a $55,000 salary equals 15% commission only when someone raises about $367,000. Commission is cheap when fundraising goes poorly and expensive when it goes well, which is not the deal most boards think they’re signing.
The bigger problem is behavior. Commission rewards the gift that closes this quarter. It does very little to reward the work that makes next year’s gifts possible: thank-you calls, impact updates, donor visits with no ask, cleaning up the database, building a monthly giving program. During my time at CRISTA/World Concern, our monthly donor program grew from about 800 to more than 4,000 donors. That kind of growth comes from consistent stewardship and patient work, and any commission plan has a hard time paying for it.
If you’ve calculated your donor lifetime value, you already know that most of a donor’s value shows up in their second, third, and tenth gifts. A pay structure that focuses attention on the first one points your fundraiser the wrong way.
Donors and funders notice
Many donors are uncomfortable learning that part of their gift went straight to the person who asked for it. Ask yourself a simple question: if a donor called and asked, “Is the person who visited me getting a percentage of my gift?”, would you be comfortable answering?
Institutional funders are often even less flexible. Candid’s answer on paying fundraisers notes that most grantmakers disapprove of percentage-based pay and that some may deny a grant for that reason alone. Grant budgets usually can’t be used to pay a writer’s contingent fee anyway, so the money has to come from somewhere else.
What to do instead when the budget is tight
If you can’t afford a full-time development director, you still have options that don’t put donor trust at risk.
Hire part-time at a fair hourly or salaried rate. Twenty hours a week from a capable fundraiser, paid for their time, is often more useful than a full-time commissioned role that chases quick gifts.
Hire a consultant for a defined project at a flat fee. Instead of “raise money for us,” try “set up our monthly giving program,” “write and submit three foundation proposals,” or “plan and run our year-end campaign.” The fee is set in advance and reflects the work, not the outcome.
If you use a bonus, tie it to the work, set it in advance, and keep it off the gift total. AFP’s code allows performance-based bonuses when they’re in line with prevailing practices, and Independent Sector suggests tying them to clearly defined measures of work quality. That might mean a modest bonus for completing a set number of donor visits, meeting a retention goal for first-time donors, or launching a new program on schedule. A bonus calculated as a percentage of funds raised is still a commission.
Treat the first fundraising hire as an investment, not a self-funding experiment. A new fundraiser rarely pays for themselves in the first year, and that’s normal. If the board is debating whether you’re ready, this episode on when to hire your first development director is a good place to start, and it helps to set a fundraising goal based on real donor data rather than on what the budget needs.
Questions to ask before you sign anything
If someone proposes a percentage arrangement, whether it’s a board member or a fundraiser pitching their services, work through these questions:
- Which gifts count? Renewals from existing donors? Unsolicited gifts? Bequests that arrive years later?
- What happens if the fundraiser leaves in the middle of cultivating a major donor?
- Would we be comfortable telling our top 10 donors how this person is paid?
- Will any foundation or government funder we rely on object?
- Does this person follow the AFP or GPA code? If not, why not?
- Does our state require registration for this kind of arrangement?
If the answers make the deal sound complicated, that’s because it is.
Where to start
If commission came up because you need fundraising help and can’t afford a full salary, don’t let the conversation end at “no.” Write down the three fundraising tasks that would make the biggest difference to your organization in the next six months. Then price those tasks as a part-time role or a flat-fee project. That gives your board a real alternative to discuss, and it gets you help that’s paid for the work you actually need done.
