Pay and Benefits

When people donate to charity they presume most of that money goes towards protecting endangered tigers, feeding starving people, or some other worthwhile cause. When members of Amnesty International donated around £10 million in 2009 they expected most of it to go towards promoting and protecting human rights around the world. They did not suppose that £533,000 of it would go to a golden handshake for the outgoing General Secretary.

 

When this fact was revealed in early 2011 it caused a furore and significantly damaged the organisation’s reputation. It also opened an important debate on the subject of pay and benefits in the voluntary sector. After all, while there are few who could defend Amnesty’s decision, many argue that senior executives at major charities should be better paid.

 

Nick Carey, Policy Officer at the Association of Chief Executives of Voluntary Organisations, says: “Charities should be looking to deliver the best possible services they can for their beneficiaries, which means attracting the best and most talented individuals – right from frontline workers to the CEO. As a result they may well need to remunerate accordingly, particularly if they are in a highly competitive market where skills and people are in high demand.”

 

Achieving the correct level and structure for pay and benefits that attract, motivate and retain top talent is a challenge in any organisation, but is particularly so in the voluntary sector. As a result this is a sector from which every pay and benefits professional can learn.

 

Amnesty International awarded outgoing Secretary General Irene Khan a £533,000 golden handshake when she left in 2009. In total it paid out around £850,000 to her and Deputy Kate Gilmore, who also left in 2009. This fact only came to light when its accounts were published at the start of 2011, and it quickly grew into something of a media storm.

 

In an attempt to quell the controversy Peter Pack, Chair of the organisation’s international executive committee, wrote to all its members, to “apologise unreservedly for the considerable upset this decision has caused”. He went into some detail about the severance agreements reached with both women, explaining that the board had decided to reach a confidential agreement with them to avoid legal action and “enormous damage to the operations and reputation of Amnesty International”.

 

Peter said that in future the organisation would “almost certainly” not make confidential pay and benefits arrangements. He promised a stronger performance review system for the new Secretary General, Salil Shetty. Most observers agree that, despite these humiliating apologies, the charity’s image has been severely tarnished. It is likely this will damage its ability to raise funds and to achieve its mission.

 

To a large extent this issue caused such a furore because of the unique way that the charity sector has traditionally viewed the issue of remuneration. In the very beginning there was no remuneration. It was a purely voluntary sector. Then as it became more formalised and professional it acquired managers, administrators, fundraisers, finance staff, HR experts and so on. They needed to be paid, but the general view was that they should be paid less than an equivalent job in the private, or even public, sector. This view persists.

 

“Charities do need to be run differently from commercial organisations,” says Marolin Watson, Business Manager at education charity Hope UK. “People accept that charities need to spend money on office space, fundraising, administration and staff salaries. However, these kind of inflated salaries and disproportionate golden handshakes are totally inappropriate in a sector that relies on the generosity of individuals and the good faith of grant-making trusts and companies.”

 

She believes that ideally charity staff should have a passion for the cause and be willing to make some small sacrifices in terms of salary levels and perks for the satisfaction of making a difference.

 

She adds: “I don’t think that charities should have to compete with commercial organisations for staff.”

 

Hope UK occasionally benchmarks its pay and benefits against those offered by charities of a similar size, and Marolin believes that this ensures reward remains fair but not extravagant. She and many of her peers know that they could earn more in the private sector but enjoy the sense of satisfaction they gain from making a difference. They also appreciate the sense of common purpose and camaraderie which this tends to engender. There are few bankers who leave their offices on a Friday evening congratulating each other on what a difference they’ve made to the world.

 

Over the past decade much has changed in the voluntary sector.

 

Angela Wright, Senior Lecturer at the University of Westminster Business School, says: “Between 1997 and 2007 we saw the voluntary sector aligning its pay much more closely with the private sector. Many of the larger charities now employ reward experts and when they benchmark pay and benefits of senior executives they do so not only against other charities but against comparable private sector organisations.”

 

To some extent this has been driven by a sense in the charity sector that they should not be expected to work for next to nothing. Lucy Caslon is the Director at Msizi Africa, a charity she founded in 2007 to help African AIDS (Acquired Immune Deficiency Syndrome) orphans. She was only able to do it in her spare time until, in 2009, she won sponsorship for a £25,000 salary from the Vodafone World of Difference programme. She has since then found further funding for an assistant on a six-month internship.

 

Lucy says: “I am just so truly grateful to get any salary so I can run the charity. However, I think there’s a real problem with the way the public views the sector. They tend to think of it as a sector full of ‘saints’ working for very little money. I work so hard but if I were to win a corporate partnership worth £50,000 and give myself a pay rise my reputation would be shot to pieces. People would ask, haven’t I raised that money for AIDS orphans?”

 

Many would agree with her, and certainly from a recruitment, motivation and retention point of view it would be desirable to offer charity workers competitive reward packages and then to incentivise good performance. The issue is that rising levels of pay have not occurred across the board and have not always been directed at the top performers.

 

Angela points out that between 1997 and 2007 pay at charities rose, but primarily for those at the top of the organisations. There has been a significant widening of the pay gap in charities. Those who were paid the least 15 years ago – and who were most in need of pay rises so they could continue to work for a cause they believe in – are, by and large, still struggling on low pay.

 

Furthermore, pay rises for those at the top are not always directed as effectively as possible. Amnesty’s golden handshake is just the most high-profile recent example.

 

Lucy says: “I’ve come across charity directors on £90,000 salaries who have little interest in their cause. They go to visit the projects, maybe plant a tree or paint a wall for a photo opportunity, then sweep out of the place as fast as they swept in.”

 

The solution, according to Angela is for charity sector employers to embrace the concept of total reward. “It clearly doesn’t work simply linking pay in this sector to pay in the private sector,” she says. “It shifts the emphasis of reward from the mission of the charity to money, and that is dangerous. Instead charities should look at the totality of what they have to offer employees.”

 

This is partly about the sense of contributing to society and partly about a positive working atmosphere, but it is also about more tangible benefits such as flexible hours.

 

Ed McRandal, Policy Adviser at the Recruitment & Employment Federation, comments: “In these troubled economic times employers in every sector have to think about how they can attract the best staff using benefits other than pay. We’re seeing many of them offer flexible hours, and achieving considerable success with it.”

 

Indeed, in a sector with a high proportion of women flexible hours can be an important reward. Whether they are mothers or fathers, the opportunity to work only in term-time or to leave in time for the school run can be just as, if not more, valuable to an employee than an extra couple of thousand pounds on their annual salary.

 

Others believe that, however the sector approaches reward, it needs greater transparency and openness about how it does so – and crucially about what it is paying its top people. Ellie Gamble, Senior Manager at business advisers Grant Thornton, works with many leading charities on the subject of pay and benefits.

“The first thing I advise any charity is to be open and transparent about reward. It will come out in the end and it is far better for them to be up front about it in the first place,” she insists. “Other than that, charities should have a clear idea of what constitutes success or failure, and then link reward to certain achievements or outcomes. Set out clear milestones. They should also look carefully at contractual arrangements. What happens in the event of termination? Get these drawn up by lawyers and ultimately be prepared for the relationship to not work out.”

 

The point she makes is that the charity sector needs greater professionalism in pay and benefits. In many parts it has already embraced the level of reward that the private sector enjoys; it is time it also embraced best practice in structuring those rewards.

 

Alex Blyth is a freelance Writer and Journalist