Gill Taylor: How we decide what to pay not-for-profit staff

Ability to pay, the going rate and recruitment and retention issues are the main factors, says our columnist

Gill Taylor
Gill Taylor

The recent Chartered Institute of Personnel and Development report Reward Management 2015 has some interesting findings and benchmarks for the not-for profit sector. The report also covers how the other half pays, in the private sector – which is interesting, but another country.

How we decide overall what to pay staff is based 60 per cent on affordability, 29 per cent on benchmarks using job evaluation, 5 per cent on benchmarks not using job evaluation and 5 per cent on collective bargaining. The top three factors determining the size of the 2014/15 pay review for all employees are the organisation's ability to pay, the going rate of competitors' pay rises, and recruitment and retention issues.

The most common type of salary structure in the not-for-profit sector is still pay spines, followed closely by spot salaries – the latter are pay rates per job that are not on a scale. Performance-related pay is used in 28 per cent of the not-for-profit organisations surveyed, with bonuses for individuals not as common as team or organisation-wide performance bonuses. Performance-related reward is declining in the private sector, down from 65 per cent of organisations to 49 per cent in 2015.

Lots of employers would like to reward individual high performers, but there are two practical issues with this. First, how can you differentiate the high performer fairly? Second, there are risks to organisational cohesion if teamwork is very important in achieving outcomes. In the not-for-profit sector, interdependencies are key elements in achieving organisational effectiveness, and rewarding the high flyer simply doesn't work against this organisational and cultural backdrop. You might please one person and end up alienating 15.

The top three most common benefits offered to not-for-profit employees are paid leave for bereavement, free tea and coffee and a pension scheme. Just under two-thirds of employers auto-enrol qualifying employees into a defined-contribution scheme. The most common pension schemes open to new entrants are defined-contribution, contribution to personal pension plans and defined-benefit. Employers contribute an average 5.8 per cent of base pay to defined-contribution schemes and employees contribute 4 per cent.

The next seven most common benefits are, in order: more than 25 days paid leave; training and career development; a Christmas party or lunch; childcare vouchers; allowing internet purchases to be delivered at work; employee assistance schemes; enhanced maternity or paternity leave; and eyecare vouchers.

While we still have austerity, and with affordability as a central rationale for our pay, few not-for-profit organisations will be considering pay rises at all this year. Those that do will not be proposing more than 1 per cent.

Gill Taylor is a sector HR consultant

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