The average charity worker would have earned £3,500 more last year had not-for-profit sector pay growth matched rises in the private sector, research has found.

Based on analysis of ONS data researchers at consultancy PBE found that the overall sector wage fall among charities when compared to companies last year was £8.5bn.

PBE found that across all sectors wage growth since 2008 has been “disappointing”, with hourly pay increasing at roughly a sixth of the pace that had been the norm over the second half of the century.

This has been “even more marked in the not-for-profit sector” with average pay falling between 2016 to 2025.

“Pay growth at the lower end of the distribution in the not-for-profit sector has had some protection thanks to the introduction of the National Living Wage. But hourly pay fell in real terms for the top half of sector employees,” PBE’s research found.

This brings “ into question not-for-profits’ ability to attract and retain sufficient numbers of experienced leaders”, it warned.

PBE points out that the private sector has more “flexibility” to react to financial challenges such as inflation.

However, charities “tend not to have the same opportunity”, with “only limited ability to nudge donation levels upwards — especially during periods of high inflation when people are feeling the pinch”.

“Not-for-profit pay growth appears to have lagged against the private sector due to resource constraints,” it added.

Inflation linked grants

Ways charity finances can be better supported include funders and government offering them “inflation-linked, multi-year grants”.

These would offer charities “a much more predictable medium-term outlook and thereby support more efficient approaches to planning and staffing”.

It would also “remove the need for emergency uplift campaigns during extraordinary periods (as happened during the pandemic, for example)”.

Such inflation linked funding could take the form of annual uplifts directly tied to the Consumer Price Index.

---