Analysis: High executive pay 'can contribute to staff anger'

Charities must provide guidance as employee anger rises at disparities between executive and staff pay, writes Liam Kay

Before its cancellation last month, staff at Action for Children had planned industrial action following a pay offer that proposed a 1 per cent award for 2015/16, with no cost-of-living rise, for 40 per cent of its 5,000 employees.

Unite and Unison, the two trade unions involved in the Action for Children staff dispute, said that average pay at the charity had fallen 52 per cent in real terms since 2010/11 and many employees were being forced into "extreme hardship".

The unions contrasted the "wholly inadequate pay offer" with the charity's appointment of five additional senior executives earning more than £70,000 a year. One person at the charity was on £120,000 a year.

Senior management pay at charities has been the subject of considerable criticism from outside the sector and in the media. But how does this impact on staff, and even on their decision to strike?

Simon Watson, the national officer for the community and voluntary sector at Unison, says that executive pay is not the main reason why staff strike, which is normally about financial hardship and feeling undervalued, both personally and within the organisation.

But he believes that the negative publicity about high salaries can affect senior management's credibility if the stories coincide with financial or structural problems at a charity. He says that if senior managers do not make the same sacrifices as the rest of the workforce, "staff become, if not cynical, a lot more distrustful of what their senior staff are saying".

He also believes that most charity employees are not in favour of high wages in the voluntary sector, and that the sector's response to high pay has been insufficient.

"I think staff think high pay is completely wrong, generally speaking, but I don't think it is enough to drive them to industrial action," Watson says. "I'm not sure the sector as a whole has responded to it. I think when employers review the pay of their staff, they should review the pay of their senior staff on the same basis."

Sally Kosky, national officer for Unite, says that most charity leaders are not on the huge salaries seen in the private sector. But she says high executive pay can increase existing staff anger, especially if employees' pay is being curbed.

The 2014 State of the Sector survey by nfpSynergy indicates that charity staff are not overwhelmingly in favour of high rates of executive pay. It found that almost half of charity sector workers said they were comfortable with charities paying people more than £100,000 a year, but only 16 per cent agreed with salaries exceeding £200,000.

The charity chief executives body Acevo says that it has never seen a situation where a breakdown in management and staff relations "can be attributed directly to concerns over executive pay" and that there is little evidence to suggest senior pay is prompting widespread industrial action in the sector.

But to address concerns over high pay, Acevo also encourages charities to follow its Good Pay Guide, which includes five principles of executive remuneration: appropriate transparency, proper process, proportionality, a rooting in performance and pay levels that enable high-quality staff to be recruited and retained.

The National Council for Voluntary Organisations' guidance on remuneration, published in April 2014, says that charities should consider publishing the salaries and job titles of their highest-paid staff and explain how the salaries reflect the charity's ethos and values.

The guidance says charities can use remuneration ratios of the highest to median salaries to keep salaries in proportion. The guidance does not recommend a specific ratio, but says they are "a beneficial prompt" to ensure pay policies are appropriate. Christian Aid and Save the Children, for example, operate a pay ratio of 4:1 for their UK staff.

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