Your Ethics or Your Money: Closing the Gap
A survey of Australian not-for-profit organisations conducted by EthicalJobs.com.au last June found that 56 per cent of the organisations surveyed reported that jobseekers were willing to work for 10-20% less for an ethical job. Another 19 per cent of organisations reported that applicants would accept a pay cut of up to 30 per cent to work in job that matched their ethics.
This apparent willingness to take a pay cut in exchange for the "ethical dividend" mirrors the reality of the average not-for-profit pay packet, with not-for-profit employees taking home $20,000pa less, on average, than those in the public sector.
Our survey focused on people looking to transition into a role that fitted their ethics and values rather than long-term trends. But are things getting better in the real world? And are there other benefits, feel good factor aside, that can help to even out the gap?
A 2006 report by Hewitt Csi identified low pay rates as a key driver of staff turnover in not-for-profits. According to the report, staff attrition and the challenge of finding appropriately skilled staff was actually beginning to drive pay rates up.
And until the GFC hit, Enterprise Care's annual Not for Profit Remuneration Report had seen CEO pay rates increase every year since 2000.
Aside from long-term trends, the tax benefits for employees working for a organisation that has attained Public beneficiary Institution (PBI) or charity status can also help to even out the difference. According to Hewitt Csi:
Whilst there is no direct extra cost to employers in offering benefits within employees’ salary packages, there are considerable tax savings for employees as benefit items are paid directly out of pre-tax dollars rather than out of after tax dollars
− Human Resources Magazine, “Not for profit sector feels salary squeeze”
While upfront pay for a not-for-profit job may be less than it's public or private sector counterpart, tax concessions and benefits can help to close the gap.
We've noticed ethical employers offering both salary packaging ranging up to $16,050 pa and up to $5,000 pa worth of FBT exempt meal and entertainment expenses. So even if a position paid a mere $32,000 with benefits of up to $21,050, you might actually be looking at a total package worth up to $53,050.
It is important to note that not all organisations can or do offer salary sacrificing or FBT benefits, and that not all employees can or do utilise them when they are available. If you currently work or wish to work in the not-for-profit sector and want to claim these benefits it is important to find out part, if any, the employer can pass on to you.
Of course, you should also check with your accountant or a financial adviser what would be the most beneficial approach for you.
And while these fiscal benefits might have some value depending on your own financial situation, don't lose sight of the many non-fiscal rewards of working for a not-for-profit, such as flexibility, not needing to wear a tie … and, of course, the inherent satisfaction in working a better world!
