In order to maintain public trust, charities have been told to publish full details of the pay of their senior executives.
The recommendation was revealed in a report of an inquiry into executive pay set up by the National Council for Voluntary Organisations (NCVO).
Legally, charities are required to indicate the number of staff in pay bands over £60,000 in their annual report. However, the new report recommends that they must go even further and publish the exact salaries of named senior staff members.
The inquiry examined extensive evidence on charity salaries, finding that senior staff in charities tend to earn substantially less than their counterparts in equivalent private or public organisations, with a ‘charity discount’ of 25-45% at senior levels.
Despite these findings, the inquiry has recommended full disclosure of pay in order to sustain public trust.
Charities have been told they should publish details about pay in an easily accessible place on their website – ideally no more than two ‘clicks’ from their homepage.
The inquiry panel has also recommended that charities also give some thought to publishing the ratio between their highest and median salaries, which would give an indication of pay throughout their whole organisation.
The inquiry has produced clear and definitive guidance on how charity trustees, normally volunteers, should go about setting senior pay, which is published as part of its report. These recommendations have the backing of the Charity Commission.
Martyn Lewis CBE, chair of NCVO, who chaired the inquiry panel, said: "Many of the charities the British public are proudest of are major operations employing thousands of people and managing tens or even hundreds of millions of pounds.
"They need highly skilled professionals in order to run to the highest standard possible and make the best use of our donations. But we believe that where they feel they need to pay high salaries in order to recruit the right people, they should be clear in explaining this to donors.
"Doing this will make it clear that we believe in being open and honest with donors.
"We don’t want anyone ever to be able to claim that charities have hidden or obfuscated information about their salaries. I hope charities will consider this an extra opportunity to explain their work and the difference that they make."
The report contains analysis of new data on high pay in charities which shows, among other findings, that independent schools and businesses and professional associations are the registered charities most likely to be paying high salaries.
NCVO gathered data on pay as part of its latest sampling of 10,000 charities’ accounts that it uses to create the UK Civil Society Almanac, the definitive guide to charities’ finances. NCVO will continue to collect this data and update it annually.
This will provide a highly reliable and authoritative source of data on charity chief executive pay from a large, rigorous, randomly selected sample, overcoming the limitations of benchmarking surveys.
At Nicklin, our experts have many years’ experience in advising clients on their responsibilities including compliance with the latest regulatory requirements. The wide range of services we provide to this specialist sector means that they can achieve the right levels of transparency being called for. Contact us for more information.