How to set pay and reward in charities

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Tips to discuss and determine appropriate pay and reward in the charity sector from NFP Consulting

Do you know what matters most to your employees? Shivani Smith from NFP Consulting discusses how to determine the appropriate pay and reward in the third sector

Recent headlines have been dominated by the topic of charity chief executives’ pay. Donors, funders and the general public are asking questions that charities need to be able to answer about how much they pay their top people, and why they’re worth it.

Take a strategic approach

But charities also need to be looking across their whole organisation and think about how they’re approaching pay and reward. It’s understood that there is an intrinsic value to working for a charity, but that doesn’t mean salaries and benefits should not be managed strategically with a view to attracting and retaining the best people.

Be aware of hiring challenges across the third sector

Cross sector comparisons show that, unsurprisingly and understandably, the charity sector average pay award is lagging behind the public and private sectors by some margin. Meanwhile, nearly half of voluntary sector employers are reporting difficulties in hiring and staff turnover continues to rise. Depending on which report you read, the numbers vary between 13 and 17%. After several years of pay freezes, more than two thirds of employees are asking for pay rises but pay growth in the charity sector has actually declined over the long term and employers foresee little prospect of change in 2016.

Consider your whole rewards package, not just pay

As a result, it is vital that charities consider how to make their organisations and their jobs attractive. Salaries need to be benchmarked and competitive, but charities should also think about the whole package that they offer. Is it attractive, well thought out and well communicated?

We recently hosted a discussion on pay and reward where our delegates told us that they weren’t sure their employees were always able to access all the information about the benefits available to them. They also suggested that some of the benefits that were offered weren’t seen as such. Christmas parties and free tea and coffee were mentioned as things that employees valued but also took for granted. It was also clear that while pay on its own wasn’t enough to attract or keep people, benefits that didn’t match what employees needed or wanted made recruitment and retention that much harder.

Keep abreast of legislation

Alongside issues of pay rises and benefits, HR teams in the sector have additional challenges ahead of them in the coming months. The National Living Wage will bring a paybill not just for those directly affected at that salary level, but also their line managers and supervisors. Larger charities, with more than 250 employees, also have to prepare for the duty to report on their gender pay equality figures. This will also inevitably have financial implications. To be able to address both of these effectively, HR teams need to be working closely with finance teams to plan and manage the costs of these new considerations.

Taking all this into account, there are some key questions charities need to be asking as they review their recruitment, retention and reward strategies.

    • Are your benefits being communicated in the right way and at the right time?

    • Have you benchmarked your salaries to ensure that your offer is competitive?

    • Are the benefits included in the package appropriate and meaningful to your staff?

  • If it applies to you, is your charity thinking about and preparing for the gender audits?

For more detail on what’s happening with pay and reward in the charity sector, contact Victoria Stickler at for a copy of our report, quoting ‘TS’.

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