The financial operations of charities are making headlines yet again. The storm surrounding the closure of the Kids Company continues to grab column inches, while fundraising techniques have also been placed under increased scrutiny. Yet, it is charity worker pay, that most frequently faces the tabloid firing squad.
The reality is that the median chief executive salary only exceeds £100,000 when organisations have an annual revenue of more than £25m. And, with fewer than 25% of registered charities having an income of more than £100,000, six-figure salaries apply to the minority. So, why do charities still face public criticism for the amount they spend on staff?
Part of the problem is the perception that the word charity means free and everyone who works for one is a volunteer. Duncan Craig, chief executive of Survivors Manchester, suggests, following the lead of other countries, adopting the terms non-government organisation or not-for-profit, rather than charity. Craig believes that would help because, like it or not, charities have to be more business-minded.
“The charity sector needs to begin acting a bit more like a business,” he says. “I don’t think we should be thinking about profit, but we have to have a conversation within society that charity no longer means – and shouldn’t mean – we are holding our hands out for people to give for no reason.”
Børge Andreassen, director of executive search at third sector recruitment consultancy Prospectus, agrees. He believes that although charities should be clear about their impact, the complexity of their cause and how they operate, the responsibility also lies with the public to decide what value a charity has in society. In other words, is the fruit of a charity’s labour worth a donation?
Penny Lawrence, deputy chief executive of Oxfam, understands the public’s anger over charity workers earning six-figure salaries, but believes staff wages at Oxfam are fairly scaled and proportionate to not only the size of the charity, but the responsibilities which the roles demand. She believes a radical reduction in the sector’s highest pay grades, however, could lead to organisations being run by individuals with insufficient experience.
“We are a $1bn business globally and have a turnover of more than $300m. You need very competent people in charge to ensure the accountability and transparency, as well as good quality management and programming, that the public expects from us.
“We do, however, aim to be in the middle of the charity sector in terms of top salaries. The reason why we do that is because we don’t want to escalate the situation. If we are in the middle, we are reasonably competitive as opposed to always trying to pay slightly more than the next development agency or NGO.”
The debate surrounding charity worker salaries will always be around and there will always be different views on what is wrong or right, Andreassen says. It is therefore important the sector is confident of its own value and it is not shy to stand up for itself.
“It should be confident about what it does and why it pays the salaries it does,” he adds. “But the public also has a responsibility to learn and understand what value charities do add to society in general.” That, he claims, should be the starting point of any discussion of fair wages in the sector.
Lawrence claims it is a difficult balancing act between wanting to offer salaries that will attract the best talent and staying true to your values and campaign missions.
She adds that while pay is of course not the main reason most people want to work for a charity, it can be a huge factor when trying to bring in leaders from abroad where competition from other NGOs can be fierce.
“We want to increase the number of people who are from the global south in our senior leadership roles. If we want to do that then pay is a real issue and our willingness to offer higher salaries is a struggle,” she explains.
Transparency is also key to building trust with donors. The Charity Commission recommends that charities demonstrate that they are committed to being open about leaders’ salaries by following new guidance on executive pay issued by the National Council on Voluntary Organisations. That guidance recommends that to maintain public trust, charities should publish full details of the pay of their senior executives.
How much a charity’s chief executive is paid is decided by its trustees, who are responsible for running the organisation and are in most cases unpaid volunteers. A Charity Commission spokeswoman warns, however, that trustees must “make such decisions very carefully, taking into account the best interests of the charity and its beneficiaries, and also being mindful of the charity’s reputation among the public and donors.”
But, how much of an influence does the pay of charity chief executives really have on potential donors? For small donations, it probably doesn’t have much of an impact, claims Alex Smith, founder of the Harrison’s Fund. For larger donations, however, he believes it does.
These wealthy donors will look more closely at the accounts and will want to know that their money is being well spent. But, he adds, they will also be interested in knowing that the charity is using the funds wisely.
“It is as much about growth and investment in the future,” Smith says. “A million quid is a lot of money, for example, but if you can invest that money and turn half of that into £10m then that is making a big difference.”
