Charities are paying their staff 7% less an hour on average than workers in other sectors, research has revealed.

Collectively charity sector staff were paid an estimated £1.5bn les than their counterparts across the UK economy in 2019, according to analysis released this week by Pro Bono Economics through its Law Family Commission on Civil Society research project.

This pay gap between charities and other sectors is rising, the think tank warns, due to record inflation of more than 10% and voluntary sector pay packets failing to keep pace with rising costs facing workers compared to other sectors.

While the private sector has boosted wages by 5.6% on average in the 12 months to May, charities have only increased wages by 3.8%.

The think tank warns that the growing pay gap “threatens to weaken the sector” through recruitment problems at a time when experienced staff are needed to meet increasing demand from beneficiaries.

“Lagging pay limits the pool of people willing to work for charities and means that limited pool is less diverse – as lower pay is likely to make it more difficult for people from disadvantaged backgrounds to take up opportunities,” said the think tank.

“In addition, low pay can affect morale in the workforce, particularly during a cost of living crisis, and has the potential to drive people out of the sector at a time when demand for charities’ services is accelerating.”

The salary gap is increasing as charity sector employees grow older, Pro Bono Economics’ study, called The price of purpose? Pay gaps in the charity sector, is also warning.

While the gap between charity workers and other sectors is 2.7% for those in their 20s, this increases to 8.4% among 36- to 40-year-olds. The gap for those aged 46 to 50 years old is 9.4%.

Our latest report data shows that the charity pay gap emerges for employees with degrees later in their 20s and rises to 13.3% by the time they are aged between 46–50.
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— Pro Bono Economics (@ProBonoEcon) August 22, 2022

Charity workers with a degree are also adversely impacted. Graduates earn an average of £40,000 less over their working lifetimes than their similarly qualified peers in other sectors.

Female workers are also among the hardest hit, earning 1% less per hour on average than their male charity sector colleagues.

“As an employer, the charity sector does not sit in isolation; it has to compete with the rest of the economy for staff and it relies on the fundraisers, volunteer managers and service delivery professionals whose work sustains it,” said Pro Bono Economics economist Jamie O’Halloran.

“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.”

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