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The voice of Scotland’s vibrant voluntary sector

Published by Scottish Council for Voluntary Organisations

TFN is published by the Scottish Council for Voluntary Organisations, Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh, EH3 6BB. The Scottish Council for Voluntary Organisations (SCVO) is a Scottish Charitable Incorporated Organisation. Registration number SC003558.

Soaring inflation set to cost third sector an extra £2 billion in salary expenditure

 

Core costs will keep rising

Inflation will cost the UK voluntary sector an extra £2 billion in staff salaries by 2024, a think tank has warned.

Pro Bono Economics said charities would have to increase salaries by 8.8% to keep up with inflation in real terms.

A typical organisation with expenditure of £1 million a year would have to increase salaries by £32,000 to keep in line with inflation.

The think tank said that salaries account for around 37% of the sector’s spending.

It said: “It is unlikely that many charities will feel able to raise pay by this much, particularly as this cost comes in addition to the new National Insurance rates increase from April 2022 and the subsequent Health and Social Care Levy starting in April 2023."

The think tank recommends charities consider wage negotiations as early as possible, while also realising that many of their staff are likely to be struggling already. 

It said it expected inflation to return to typical levels of 2% in 2024, though there was “great uncertainty in these estimates”. 

It also warned that high inflation was likely to mean that charity income is unlikely to keep pace with rising prices and that demand for services was likely to rise because of a cost-of-living squeeze. 

It said that the real value of a donation of £20 would be £17.60 in 2026 once inflation is factored in, and multi-year grants recently awarded would devalue over time. 

“If an organisation is awarded a grant of £100,000 per year in 2021 for the next three years, the 2023 grant would be worth £94,000 after accounting for inflation,” it said. 

 

Comments

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Dominic Notarangelo
4 months ago

Salaries should be set at a maxi um percentage against income and not considered against expenditure.

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Marcus
4 months ago

Dominic, this proportion of salaries versus overall expenditure is highly dependent on the business model and sector of the charity. It’s wiser to benchmark it on this basis, rather than for foundations and policy makers etc. to decree rules like this.