There is a widening pay gap between charities and businesses, although the rate of earnings growth in both sectors is failing to keep pace with inflation, new analysis shows.
Comparisons with the latest data from the Bank of England’s decision maker panel survey revealed that the charity sector “remains in a very precarious position” financially, according to the think tank Pro Bono Economics.
It found that year-on-year realised wage growth was up 5.6 per cent for businesses in May 2022 compared with 3.8 per cent for charities.
The research comes from a quarterly survey of both the private and not-for-profit sectors with around 2,700 responses, including approximately 200 charities. It had been shared with PBE for the first time.
PBE’s analysis said: “It is likely that the difference in motivation between typical employees in businesses and employees in not-for-profits allows for this [difference in wage growth].
“Not-for-profit employees are more highly motivated by a sense of satisfaction in their work and a sense of purpose, while private sector employees are more highly motivated by pay and praise.”
The think tank warned that “with the combination of low pay likely to exclude employees of under-represented groups from the charity sector, and high levels of concern over workforce burnout, charities may not be able to sustain this growing wage gap with the private sector for long”.
Elsewhere in the data, two-fifths (41 per cent) of charities reported facing high or very high levels of overall uncertainty, compared with 54 per cent of businesses.
Despite this, the figures were an improvement on those of the second quarter of 2020, at the height of the first lockdown, when 79 per cent of charities reported high or very high levels of uncertainty.
The survey also revealed that while businesses and charities alike said they expected employment growth rates in the next year of 3.2 per cent, about 85 per cent of respondents from both sectors said they were finding it harder than normal to recruit.
PBE’s analysis warned that potential recruits may opt for jobs in the private sector instead because of the better salary prospects.
It said: “While the labour market is tight and the private sector is also on the hunt for more employees, the growing pay gap between the sectors might hold the charity sector back from filling the vacancies it intends to create.”
In a survey of charity leaders last year, two-thirds said that they were worried about losing staff because of the pressures created by Covid-19 and growing demand for services.