John Mohan: Let's get a sense of proportion about senior salaries

John Mohan
John Mohan

The bandwagon about the salaries of senior staff in charities rolls on. This is part of a wider debate about competence, probity and efficiency, stoked by people who, one suspects, have a tenuous relationship with evidence and a penchant for selection of anecdotes that buttress their case. One example is the report earlier this summer in The Sun that expressed surprise the Alzheimer’s Society wasn’t run entirely by volunteers.

In the Third Sector Research Centre we have done the most extensive piece of work on this, so we field inquiries from journalists about the subject from time to time. One such argued that there were wide variations in the amounts that some charities paid their chief executives and senior management, with some heads of "relatively small organisations paid far more than one might expect". The other was interested in organisations that might be spending a "large proportion of income on senior staff costs".

The answers to these inquiries depend on what you mean by a small or large charity and what you mean by "high" salaries. Camila Batmanghelidjh of the charity Kids Company, which closed recently, argued that hers was a "small" charity. That might be true relative to the big medical research and international development charities, but an annual income that had exceeded £20m in some years of its operation would put Kids Company comfortably in the top 0.5 per cent of English and Welsh charities. The typical charity is much smaller – the median income is about £13,000, and only 5 per cent or so have incomes greater than £750,000. Only about 3 per cent of charities below that level pay anyone £60,000 or more (charities must disclose numbers of staff paid at this level or above).

Discussions of the salaries paid by charities to senior staff need to bear this in mind. First, it might not be sensible to pose the question purely in terms of the proportion of income paid to senior staff. If you pay someone even the average charity salary, which is about £26,000 a year, that’s going to account for 5 per cent of the budget of a charity with a turnover of £0.5m, which you might think is a very large figure; but if you pay average salaries you might not be able to attract the talent that is needed. Paying more than that – a full-time salary in the range of £30-£40,000, say – would account for 6 to 8 per cent of income, a sum that might outrage the public if posed so baldly and simplistically. But remember that that chief executive could be managing buildings and assets, employees and large numbers of volunteers, not to mention having to spend a substantial amount of time on fundraising. When you think of the content of the job, these figures begin to make more sense.

It is also helpful to consider some specific types of charity. Hospices are a good illustration: some of the smaller ones spend less than £2m a year, but they might employ specialist medical staff. Of course, they will have to pay the going rate for those staff – unless you want to return to the pre-NHS era, when individual consultants gave free care to the poor, cross-subsidised by their income from private patients. It wouldn’t be a surprise in those circumstances to see that the salary of the highest-paid staff member alone accounted for 2 per cent or more of the charity’s income. Many other charities have a relatively small budget but, given the nature of what they do, have to employ people capable of operating at a high level.

So the debate needs to get a sense of proportion. Most charities are not large in financial terms, but many (given what they do) employ highly qualified professional staff so that they can deliver specialised services to a high standard. The population of charities is large – 160,000 or so in England and Wales – and it’s always possible to find anecdotes that prove whatever your case might be. But most charities, most of the time, keep a very close eye on remuneration, which is why the proportion of staff in the sector receiving salaries of £60,000 or more is considerably lower than in the private or public sectors.

John Mohan is director of the Third Sector Research Centre at the University of Birmingham

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