executive pay breakfast learning session presentation

8/12/2019 Executive Pay Breakfast Learning Session Presentation

1/36

Breakfast learning session

charity senior executive pay


2/36

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


3/36

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

3


4/36

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


5/36

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

5


6/36

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

6


7/36


8/36

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

8


9/36

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

9


10/36

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?

10


11/36


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

11


12/36


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

12


13/36


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

13


14/36


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

14


15/36


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?

15


16/36

Discussion

Which of these considerations has greater

weighting or importance for your charity?

Why?

16


17/36

What the Inquiry concluded and

how it compares to other sectors

17


18/36

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

18


19/36

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

19
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


20/36

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

20


21/36

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

21


22/36

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

22


23/36

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


24/36

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

24


25/36

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)

25


26/36

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

26


27/36


28/36

Break

28


29/36


30/36

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.

30


31/36

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

31


32/36

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

32


33/36

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

33


34/36

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.

34


35/36

Questions

35


36/36

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/

executive pay breakfast learning session presentation

Documents