Charity pay is about to be in the news again – are you ready?

This report follows upon a Charity Commission investigation into the charity Marie Stopes International last year, which paid its Chief Executive a remuneration package totalling over £400,000.

We don’t yet know what’s in the report – for example, will it focus just on ‘CEO’ pay or will it consider related issues like low pay, unpaid internships, or the living wage? Either way, the report has the potential to create yet another negative media storm about charities.

And given the Commission’s current narrative about ‘public expectations’, it’s a good bet too that whatever the research says, the press release will repeat nebulous lines about ‘the spirit of charity’ and ‘behaving in an authentically charitable way’ whilst leaving out critical context and data.

To be clear, we’re not here to defend high salaries – that is the job of the trustees of individual charities, who are responsible for setting them. But this discussion is typically high on hyperbole and low on information, and we’ll point this out even if our regulator won’t.

So whether you’re a small, volunteer-run charity and have no paid staff at all, or are a CEO at a large organisation earning six-figures, here are some facts and approaches to help you respond to potential media and political scrutiny:

Be prepared and be transparent

1. Make sure your remuneration policy is up-to-date and be prepared to share it. Check when this was last reviewed and how board discussions were minuted. Being open about how pay is decided is far better than avoiding the question. Trustees: this is your responsibility – don’t hide behind your CEO or PR team.

2. Clearly identify who on the board will speak on behalf of the charity if required. Putting your CEO on the news to defend their own worth isn’t great practice. If you think you might be in the firing line, agree a press statement in advance.

3. Don’t get defensive – use any scrutiny as a chance to educate the public about some key facts:

• Charity trustees ultimately decide pay – not the CEO or other senior staff. Trustees are nearly always unpaid volunteers and the buck stops with them. Staff serve at the discretion of trustees.
• Pay is related to what the charity can afford and the size of the job.
• Charities paying salaries of over £60k must disclose this in their accounts. These can be found on a charity’s website or in the Charity Commission register at www.gov.uk.

Know your facts

4. There are over 168,000 charities on the Charity Commission register. Just under three-quarters of those have an annual income below £100,000, and are likely to have few or no paid staff, or anyone called a ‘CEO’.

5. For charities which do have paid staff, the average CEO salary is £52,000 per year.

6. Available data suggests that senior salaries in charities are between 25-40% lower than for comparable roles in the private and public sectors.

7. Charity income and assets are concentrated in a relatively small number of larger, mainly national and international organisations. About 0.5% of registered charities have annual incomes of over £10m. Higher salaries for CEOs or senior staff are more likely to be represented in this group of charities. Available data suggests that fewer than 1% of charities pay any salaries above £60,000.

8. Information about senior pay in charities is available in annual reports and accounts that charities are legally required to produce. Charities with an income of over £250,000 a year have to disclose a breakdown of all employees paid above £60,000 in bands of £10,000.

9. Charities exist for the public benefit, which means that all charitable expenditure – including salaries – must be in support of the charity’s purposes and mission. Neither staff nor trustees can own any part of the charity or derive income from owning it (as may happen in companies). Some charities are highly complex organisations, employing thousands of staff and volunteers, sometimes across different countries and continents. Effectively managing such organisations requires high-level management and strategic skills.

10. Not all charities receive donations from the public. Some charities are funded entirely or substantially by individual philanthropists or companies. Similarly, grant-making charities (foundations) are usually endowed with money by philanthropic donors and typically do not raise donations from the general public. Many other charities generate most of their income from trading or commercial activity.

DSC will evaluate the forthcoming Charity Commission report once it’s out and will publish our response, so stay tuned to www.dsc.org.uk, @DSC_Charity for further updates!

Sources

Acevo Pay and Equalities Survey 2019, Association of Chief Executives of Voluntary Organisations (ACEVO)

Report of the Inquiry into Charity Senior Executive Pay, National Council of Voluntary Organisations (NCVO)

Charity Register Statistics, Charity Commission for England and Wales, www.gov.uk

Why do charities have paid staff? Factsheet from the National Council of Voluntary Organisations (NCVO)