High salaries in charities: bad science rides again

The bandwagon about the salaries of senior staff in charities rolls on, most recently with a feature in the Times about pay in hospices. This is part of a wider debate about competence, probity and efficiency, informed by selection of anecdotes which are designed to generate headlines or support a pre-determined conclusionThe report earlier this summer in the Sun which expressed surprise that Alzheimer’s Society wasn’t run entirely by volunteers is an example of the misconceptions that exist about the voluntary sector.

In the Third Sector Research Centre we have done the most extensive piece of work on this so we field journalistic inquiries about the subject from time to time. One argued that there were wide variations in the amounts that some charities pay 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”. What does the evidence say? The answers to these questions depend on what you mean by a small or large charity and what you mean by “high” salaries. Camilla Batmanghelidh of the charity Kids’ Company, which closed recently, argued that they were a “small” charity. That might be true relative to the big medical research and international development charities, but with an annual income that had exceeded £20 million in some years of their operation, that would put them comfortably in the top half percent of English and Welsh charities. The typical charity is much smaller – the median income is around £13,000 and only 5% or so have incomes greater than £750 000. Most don’t have paid staff, and few have staff paid high salaries. They must also be transparent about salaries – they must report the numbers of people paid at least £60K in their annual accounts.

Is it at all sensible to pose the question purely in terms of the proportion of income paid to senior staff? If you pay someone even the average salary which is around £26,000 a year, that’s going to account for 5% of the budget of a charity with a turnover of half a million pounds, 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 – say a full-time salary in the range of £30-£40,000 – would account for 6 to 8% of income, a sum which 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 fundraising. When you think of the content of the job these figures begin to make more sense.

Here is a table which illustrates some of the issues. It summarises data from a sample of several thousand charities’ accounts.

Charity
income Number of High salaries Proportion
£M Charities as percentage of charity income of charities that pay at least
income one person at least £60k
0.5 – 1M 3,613 9.66 0.03
1 – 2M 2,395 4.84 0.12
2-3M 957 2.99 0.29
3-4M 564 2.18 0.39
4-5M 387 1.79 0.51
5-10M 871 1.31 0.54
10-100M 896 0.64 0.67
100M+ 59 0.14 0.8

Thus it’s only when you get to the small numbers of charities with annual budgets of greater than £4Mn that the majority pay at least one person a salary of £60K or more. For smaller charities in this table it’s a much lower proportion. And over 80% of charities in the UK have budgets below half a million pounds. There really are not many organisations paying these salaries.

It is also helpful to consider some specific types of charity. Hospices are a good illustration – some of the smaller ones spend under £2Mn a year but they may well 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 in which 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 accounted for 2% or more of the charity’s income.  That’s why the figures in the middle column reduce the larger the size of the charity. And 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 it is quite possible that they will appear to spend a relatively large percentage of resources on staff.

The debate needs to get a sense of proportion. Most charities are not large in financial terms, but many (given what they do) do employ highly qualified professional staff so that they can deliver specialised services to a high standard. The population of charities is large – 160000 or so in England and Wales – and it’s always possible to find anecdotes that prove your case. But most charities are very well aware of pressures on their budgets, which is why the proportion of staff in the sector receiving salaries of £60 000 or more is considerably lower than the private or public sectors.

Unfortunately the tendency in this field is not to let the facts get in the way of a good story. Once again coverage is reduced to soundbite and individual charities are put on the defensive when, in comparison with the private or public sectors, there’s no evidence of a problem of excess pay for senior staff.

 

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