Charities are required by law to give employees at least three months' notice. But some organisations are unable to comply because statutory agencies often fail to confirm funding levels for the following financial year until February or March, preventing voluntary organisations from making proper long-term financial plans.
"Some charities are faced with the choice of either making their staff redundant each year and then re-recruiting them, or keeping staff on and possibly breaking the law if funding is not renewed," said Nick Aldridge, policy and communications officer at Acevo.
The problem is one of many complaints about red tape to be uncovered by Acevo in a survey of members for its submission to the Government's Efficiency Review (Third Sector, 21 January).
For example, many voluntary organisations that have applied for Neighbourhood Renewal Funding in the London boroughs of Tower Hamlets and Newham, will not be told if they are to receive funding for 2004/5 until 31 March.
Charities also flagged up problems of excessive paperwork and a general failure at local level to implement the Treasury's recommendation that statutory funders should promote full-cost recovery by paying a fair portion of charities' overheads.
"We have been quite surprised by the scale of some of the problems," said Aldridge. "A couple of organisations have got back to us to say they don't really experience any, but more commonly we have received 10-page lists. Age Concern submitted eight pages, and I am expecting 20 pages from Citizens Advice."
One charity has to submit 32 reports to a funder every year. Another reported using nine days of staff time filling in an assessment questionnaire for the National Care Standards Commission.
"Many third sector services and organisations are at risk of collapsing under the sheer weight of duplicated data collection, endless application forms, and annual renegotiations," said Acevo chief executive Stephen Bubb.
Another theme was how differently the Government treats voluntary organisations compared to public and private sector bodies. For instance, it refuses to pay cost of living increases for voluntary sector staff, even though these are routinely paid to local authority staff.
Of the 70 chief executives that replied to the survey, only two gave examples of good practice. Mental health charity Rethink has negotiated a 10-year contract with Derbyshire County Council, and Action on Disability and Development has merged eight contracts with the Department for International Development into a single five-year strategy.
Acevo plans to send full details of all complaints to the head of the office of Government commerce, Sir Peter Gershon, who is leading the joint Treasury and Cabinet team working on the Efficiency Review. Details will also be sent to the Conservative Party's James Report into inefficiency.