executive pay breakfast learning session presentation
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Breakfast learning session
charity senior executive pay
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Speakers
Sarah Welsh, Director of Planning &Resources, NCVO
Rosie Chapman, Secretary to the Inquiry intoCharity Senior Executive Pay and anindependent charity advisor specialising ingovernance, policy and regulation(www.bprcassociates.com)
Ann Cummins, Humanus, an independentconsultancy specialising in reward strategy, jobevaluation, pay and grading,(www.humanus.com) 2
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What this briefing will cover
Backgroundthe Inquiry
Pay: some facts and figures
Recommended considerations for settingremuneration
Inquirys recommendations
Sector comparisons Case study: how NCVO has implemented
the Inquirys recommendations
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Pay and Prejudice - background to
the Pay Inquiry
30 charity chiefs paid more than 100,000 ayear (6 Aug 2013)
Turn of charities to be in the spot-light? Private sector shareholder revolt
Public Sector: Hutton Review of Fair Pay
Charities spend too much on executivesalaries: top concern amongst 42% public ina recent poll (Ipsos MORI/NPC April 2014)
UK median salary 27,000 (ONS Dec 2013) 4
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The Inquiry
September 2013April 2014
Chair: Martyn Lewis (Chair, NCVO)
18 Panel members
Evidence inc: 54 letters and emails from the public
104 comments from charities in response to press articlesin August 2013
227 responses to a NCVO survey 38 comments to two NCVO blogs
18 interviews and meetings with interested parties
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Pay: some facts and figures
793,000 staff, equivalent to approx.
630,000 FTE (TSRC/NCVO)
Approx. 2% UK workforce15 year trend
Vol sector wages have risen more quickly than
private or public Differentials narrowed/now no longer exist,
esp. for more junior grades
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But differentials stills persist, esp. at
higher levels
Charity ceos base salaries up to 25% lessthan private sector peers in equiv. organs;45% if bonuses included
Esp. true for charities funded primarily bydonations and philanthropy rather thancontracts/fees
About the same as public sector though(Source: Hay Group)
Over 6% private sector earn 60k or more c.f4.5% public sector and 1.9% charityworkforce
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Headline figures
15,000 employees in registered charities in
the UK paid at least 60,000 in 2011
Majority (8,000) employed in non-general
charities e.g. schools, hospitals, housing
associations, statutory bodies
Size not a direct co-relation, but 2/3rds
employed in charities with an income of
10m or more
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Considerations when setting senior
salaries - I
Trustee responsibilities
Role of Remuneration Committee (plusindependent committee members)
Sometimes combined with Resources,Nominations, Recruitment etc.
Purpose, aims and values of the charity andits beneficiary needs
Impact on overall pay policy e.g. Anti-poverty charities
Service delivery charities?
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Considerations when setting senior
salaries - II
Skills, experience and competencies required Not just about size e.g. smaller charities running
former public services
Technical or sector knowledge (e.g. specificbranches of medicine, professional associations)
Labour shortages/transferable skills (e.g.fundraising, IT?)
International leadership? International market?
Be consistent, and guard against settingprecedent
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Considerations when setting senior
salaries - III
Ability to pay Track record in attracting and retaining staff
Benefit the role brings
Cost to the charity of increasing remunerationlevels (inc. perception)
Affordable: short and longer term?
Appropriate
Priorities (e.g. pay pot focussed on improvingpay of lower rather than higher-paid staff?)
Dont guarantee increases
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Considerations when setting senior
salaries - IV
Assessment of charitys/senior staffperformance against expectations
Delivery of targets
What is performance threshold for an increase?What is the total remuneration potential?
Pay structure: consistency with other staff?
Non-consolidated awards?
Nature of wider employment offer And role of succession planning, leadership
development
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Considerations when setting senior
salaries - V
Info available from other sources
External benchmarks (e.g. local govt, health,academic)
Specialist firms...but note concern that canlead to wage inflation
Be transparent about source Consistency: ability to replicate
Location (London vs. rest of UK?) Picking your statistics (median vs. upper quartile?)
Data contributes to, but doesnt determinedecisions
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Considerations when setting senior
salaries - VI
Likely impact on, and views of: Beneficiaries (satisfaction with the service)
Donors (propensity to give)
Funders (assurance that people with the rightskills are in place)
Volunteers/potential volunteers
Employees
Relationship between pay of senior staff andcharities whole workforce
Setting a maximum ratio?
Living Wage?
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Discussion
Which of these considerations has greater
weighting or importance for your charity?
Why?
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What the Inquiry concluded and
how it compares to other sectors
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Good Practice principles
Setting pay - good practice principles
Above 500k adopt a remuneration policy Set out process thats followed
How pay and employment conditions are takeninto account
Role of trustees
Use of benchmarking/proxies/comparisons
Role, where applicable, of any employee
consultationConsider value of working for a charity, andexplain reasoning
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Remuneration ratios
Merits in using
Inquiry heard of rates between 1:3 and 1:20
1:6 also popular (Difference between 16,850
Minimum Income Standard/7.65 p.h.Living Wageand 100k)
http://www.jrf.org.uk/publications/MIS-2013
http://www.livingwage.org.uk/calculation
But not without dangers Out-sourcing
Growing charities
Use top-to-median to avoid skewed results
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http://www.jrf.org.uk/publications/MIS-2013http://www.livingwage.org.uk/calculationhttp://www.livingwage.org.uk/calculationhttp://www.livingwage.org.uk/calculationhttp://www.jrf.org.uk/publications/MIS-2013http://www.jrf.org.uk/publications/MIS-2013http://www.jrf.org.uk/publications/MIS-2013http://www.jrf.org.uk/publications/MIS-2013 -
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Transparency: SORP
requirements
Current:
Report salaries above 60k in 10k bands
Report highest paidPotential New: (Financial Reporting Council,
May 2014)
Publish senior executives aggregateremuneration
Disclose remuneration policy
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Transparencythe Inquirys
recommendations
Publish an annual remuneration statement
explaining approach and policy
Explain challenges face and why specialist
staff are required
Explain how impacts upon delivery of
charitable purposes
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Transparency
Report actual remuneration, roles and names ofindividual highest-paid staff, as defined by thecharity
Always include the ceo irrespective of salary(E.g. Marys Meals, Salvation Army)
Plus anyone who earns more than ceo (e.g.fundraising, IT director?)
FRC (as adapted) People to whom the trusteesdelegate day-to-day authority and responsibilityfor managing, planning and directing theactivities of the charity
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Transparency
Report actual remuneration, roles and
names of individual highest-paid staff, as
defined by the charity
Can be a simple definition e.g. all CEOs
direct reports (exc. support staff).
In some cases more e.g. large charities with
very few direct reportees Be realistic. Doesnt have to be all 60k+
staff
But dont forget trading subsidiaries23
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Two clicks to clarity
Publish all this information on the charitys
website (no more than two clicks from the
home page)
Figures may be different to accounts though:
E.g. someone who joins mid-way through the
year will show actual earnings in TAR, c.f.
full year equivalent on website
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Remuneration - definition
Total financial reward
Salary
Bonus (if applicable)
Pension (employer pension costs not
included in charity SORP definition of an
emolument so list separately)
Benefits-in-kind (e.g. car, health care, childcare vouchers)
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Senior staff pay transparencycomparison by sector
Features: Charities SORP
Inc. proposed
Inquiry A small
company
Listed Companies Local
Authorities
Good practice principles Arguably implicit
Remuneration policy
Ratios Consider
Publish ann Rem
Statement
Publish no of staff 60k
upwards
(50k and
above)
Publish aggregate
remuneration
(from 2015) Only individual
amounts for exec
directors
tbc
Publish names, roles and
exact salaries
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Break
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What we already had
Remuneration & HR committee set up as a
committee of the board in 2009.
Committee members include 3 trustees and
2 HR & Remuneration specialists.
Delegated responsibility to set the CEO and
Directors remuneration.
Annual pay rise usually following that given
to staff alongside reasonableness review.
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Drivers affecting senior pay at
NCVOUnique position representing the whole of thevoluntary sector.
Membership organisation requiring strong
leadership skills.Impressive reputation in the sector and withministers
Breadth and depth of skills required
Concluded that we need to benchmark againstthe largest charities
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What we tightened up on as a result of
the review
Clarity as to the market we seek to recruit
from and need to pay to help retain
Clarity as to the factors needing to be
considered
Clarity as to what benchmarks to use and
how much tolerance to allow
Publishing the salaries on our web-site2
clicks away
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How we determine remuneration
Negotiate pay rise for staff generally with theUnion
Take account of:Rates of pay increases in voluntary sector in London
Inflation
What NCVO can afford to pay
Salary data from salary surveysbenchmark against voluntary organisations of oursize in London
Consider impact of applying the rise agreed forstaff to the CEO and SMT
Benchmark against larger charity data inreputable salary surveys
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How we report
Full disclosure of each salary and who earns
what
Err on the side of more info e.g. explain how
TUPEd staff has impacted.
2 clicks away from home page
Policy sets out our approach to pay and
benchmarking.
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Questions
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Breakfast learning session
charity senior executive pay
Sarah Welsh www.ncvo.org.uk
Rosie Chapman www.bprcassociates.com
Ann Cummins www.humanus.com
http://www.ncvo.org.uk/http://www.bprcassociates.com/http://www.humanus.com/http://www.humanus.com/http://www.bprcassociates.com/http://www.ncvo.org.uk/
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