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Use this page to learn how to set a salary structure and ensure you reward staff with fair and competitive pay.
When setting salaries in your organisation, you’ll need to balance:
You’ll also need to meet the:
Many charities choose to pay the real living wage recommended by the Living Wage Foundation. This is different from the NLW, which is a legal minimum.
The Acas website states the current NLW and NMW.
A salary structure, or pay scale, is a system you can use to decide how much you pay employees.
It’s best practice to base a salary structure on:
The formality of your salary structure is likely to depend on the size of your organisation.
Very small organisations (for example, with fewer than 10 employees) may find it impractical to conduct a formal job evaluation. Instead, they could:
Once your organisation gets bigger, you are likely to need a form of job evaluation. For small organisations, a simple classification system, like the one below, may be sufficient.
As organisations grow, they're more likely to need an ‘analytical’ job evaluation scheme, where the job is broken down into ‘factors’ and points are allocated to these factors.
Find out more about analytical job evaluation schemes from the Acas job evaluation handbook.
Benchmarking is the process of collecting salary data for similar roles in other organisations to establish the market rate.
It helps you offer fair and competitive salaries. If you set salaries below the market rate, you may find it difficult to recruit and retain staff.
There are several places you can go to check the average salary for a job role.
More general tools you can use:
Things to consider when benchmarking:
Occasionally, you may find you need to set a salary at a higher level than indicated by your job evaluation and benchmarking, due to difficulties in recruiting. In this case, you could pay a basic salary, plus a separate market supplement. This helps explain why additional pay is being made and will remind you to review the market supplement against the market rate in the future.
You’ll need to consider whether you want to have single (‘spot’) rates of pay or to allow for salary progression. If the latter, decide what factors you’ll base salary progression on (eg length of service or performance). Consider all options and choose the most appropriate for your organisation.
If you decide to set salaries based on a scale (eg five points, each 3% apart), make it clear to staff that incremental salary progression each year is not guaranteed, but at the organisation’s discretion.
Some charities have performance-related pay schemes. Such schemes are intended to give most reward to those who contribute most. There are downsides of performance-related pay schemes – they can be time-consuming to operate and have the potential to cause more demotivation than motivation.
For further information, see the CIPD's guidance on performance-related pay.
You should consider developing a pay policy, so all staff and managers are clear about how pay is reviewed.
Your pay policy could include:
If you’re an NCVO member, you can download our editable sample pay policy.
Last reviewed: 01 August 2022Help us improve this content
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