Charity workers are paid 7% less per hour than their counterparts in the wider economy, a report by Pro Bono Economics (PBE) has found.
The charity sector would have to increase pay by £1.47bn a year to close the gap with the wider economy, estimated the report, which warned that low pay threatens to weaken the sector, and shows its work is being undervalued.
PBE’s report said that the cost-of-living crisis is causing the pay gap to grow, with the sector needing to spend an additional £3.3bn by 2024 to ensure wages do not fall in real terms.
“Four in five charities already say they are struggling to recruit at present, and systemic low pay is likely to exacerbate the problem,” it said.
Figures from the charity sector responded to the research, with some saying charities were currently unable to increase pay due to a lack of funding.
PBE’s analysis, which was drawn from the largest household survey in the UK and conducted for the Law Family Commission on Civil Society, also found that the pay gap between charity sector staff and those in the wider economy was particularly wide for men and older workers.
Charity sector would have to spend extra £3.3bn to keep up with inflation
The issue of low pay in the sector is only likely to get worse due to rising inflation, PBE predicted.
Average wages in the year to May 2022 rose by approximately 3.8% among charities compared with 5.6% for other businesses, according to recent Bank of England data.
And the study said the sector would have to spend an additional £3.3bn by 2024 to ensure wages do not fall in real terms.
“Funders, philanthropists and policymakers need to address pay seriously and support charities to attract and retain committed, talented and diverse staff,” it said.
Low pay ‘weakens the sector’
The report said that while the charity sector workforce is vital to the functioning of the economy and society, charity employees face “systemically lower pay”.
This is likely to make the sector a less attractive place to work, reduce levels of diversity and organisational morale, which is likely to affect recruitment and retention in the sector and therefore reduce its impact, the report warned.
Jamie O’Halloran, economist at Pro Bono Economics, said: “The widening pay gap identified in this research poses a serious threat to the sector and its impact, especially during a cost-of-living crisis. Lagging pay could lead to an exodus of talented staff and acts as a barrier to many from diverse backgrounds considering a career in the sector.
“Amid soaring inflation and with a recession predicted, the economic challenges faced by charities are compounded by the issues created by low pay, at exactly the time the nation needs the sector to be firing on all cylinders.”
Men paid 12.3% less in charity sector than wider economy
Wages for men in the charity sector are 12.3% lower than those in the wider economy, compared to a 4.7% pay gap for women, the report said.
But women in the charity sector, who make up 60% of the workforce, are still paid 4.1% less per hour on average than men, the report said.
This is partly due to their being underrepresented in more senior roles. The gender pay gap in the charity sector is absent or small until people are around 35, at which point it widens.
However, the gender pay gap in the sector is smaller than in the rest of the economy, estimated to be around 12%.
The report’s data shows charity workers in their early 20s earn on average 2.7% less per hour than those in the wider economy. However, for workers between 36-40 this shoots up to 8.4%, growing to almost 10% for those aged 46-50.
Charity workers with higher qualifications experience a bigger difference in their pay than those with lower qualifications, with graduates earning an average £40,000 less over their working lives than similarly qualified peers in the rest of the economy.
‘Not sure that the low pay drives away talent’
Charity sector leaders shared their reactions to the study.
Debra Allcock Tyler, chief executive of DSC Charity, said in response to the report that the sector underpays because it cannot afford not to. She said: “We do underpay. But: not for greed; not for profit; not for private wealth. Largely because we can’t afford to do it and maintain services.
“Especially now, most of us are searching for pennies down the back of the sofa just to keep the lights on. It would help if the government would change its stance on irrecoverable VAT (roughly estimated at not far off £2bn of cost) and we had a fairer playing field like the private sector. Not sure our low pay drives away talent though. No evidence for that that I’ve seen.”
Jane Ide, chief executive of ACEVO, said she has seen examples of people leaving the sector to work elsewhere for better pay.
Former NCVO chief executive Karl Wilding tweeted that the research: “Very much confirms/extends what any serious commentator needs to know about charities: high pay for CEOs is not the problem. It's low pay that people should be worried about if you want good services that people rely on.”
Charity leaders concerned about managing demands for higher wages
Neil Heslop, chief executive of the Charities Aid Foundation said: “This helpful new data provides insight for charity leaders as they consider the challenges to come over the next year.
“Charities are under significant pressure to meet increasing demand from their communities due to the cost-of-living crisis, whilst being impacted on many fronts by rising costs and significant wage pressures themselves. Our own research found that four in five charity leaders are concerned about managing demands for higher wages from staff.
“Volunteers and workers in the charity sector are largely driven by a desire to help people and make a difference. But they face the same concerns as those in other sectors about how they can continue to look after their families experiencing rapidly rising bills.”
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