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Many people would like to work for a charity. Dedicating your career to an organization that helps others is incredibly rewarding. However, almost everyone needs to earn a wage – we all have bills to pay! But if charities raise funds to help others, do they pay a wage of their employees? Do you get a salary if you work for a charity?

Charity employees are paid a salary. They earn a wage for the work they do, in the same way a business or government employee would. This differs from charity volunteers who do not earn a wage but may be paid a daily stipend to cover their costs.

Right, so that’s an overview. But let’s look a bit deeper…

Why Do Charity Workers Get Paid?

So, its clear charities do pay their employees. But aren’t charities supposed to use the money they raise to help others? Can’t people donate their time to charities and work for free? Well, some do. But there are actually several good reasons why charity workers get paid. These include:

• Ensuring full-time staff
• Retaining staff
• Attracting the right skills
• Keeping talented staff

Let’s take a quick look at each of these…

The first reason why charity workers get paid is because it allows the charity to have a base of full-time staff who work for them. Many charities are large organisations doing complex work. They need a dedicated team of staff in order to work effectively. In order to have people to work full-time for them, charities need to pay a wage to their workers.

The second reason why charities pay their employees is so they can keep their staff. Almost all people need a wage in order to live. There are very few people who can afford to work for free, especially for any length of time. If charities want to keep their staff, they need to pay them. Otherwise, staff will leave looking for paid employment.

A third reason why you get paid to work for a charity is because it helps the charity attract the skilled staff they need. Charities are complex organisations that need a range of skills. From fundraising to communications, from logistics to project managers, charities need to attract skilled, experienced and educated people. Paying a wage allows charities to recruit competitively.

A final reason why charities pay their workers a wage is so they can keep their top talent. Highly skilled people have options in the labor market. If charities did not pay, their best staff would leave to work in the private or public sector.

Do Charity Workers Pay Tax?

Ok, so its clear charity workers are paid and there are good reasons for this. But what about tax? Surely charity workers are dedicating their careers to helping others, are their salaries tax deductible? Do you even pay tax if you work for a charity?

Charity workers pay tax in the same way an employee for a company does. They are subject to the same income tax laws as workers in the private and public sectors. There are no tax exemptions for charity workers.

People who work for charities receive a salary in the same way those who work for a business or the government do. Therefore they are subject to the same tax laws. When they receive their salary, they  must pay a percentage of it as income tax. Charity workers must also pay any local or state tax the same as any other employee would.

From the government’s perspective, charity workers are earning a wage and therefore must pay tax on it. From the charity’s viewpoint, they are paying an employee the same as a business would and therefore, they must remain compliant with any national tax laws.

Although in many country’s charities are exempt from some taxes, in basically every country charity workers must still pay tax on their wages. They also must pay any health insurance or pension contributions that are legally mandated. Essentially, working for a charity is the same as working for a business when it comes to your personal taxes.

How Do Charities Pay Their Employees?

Charities pay their employees in essentially the same way a business does. Staff are paid through the payroll procedure. This is the monthly process of recording, calculating, controlling and paying staff salaries. A charity will manage payroll almost identical to how a private business would.

Employees at a charity will receive their salaries into their bank accounts. These are normally paid at the end of each month. When being hired by a charity, the human resource staff will request the new staff’s bank details. These are then added to the payroll files and the charity uses these to pay the staff their monthly wages.

When you work for a charity, you will be paid your gross salary. This is the total amount you earn for doing your job for the charity. From your gross salary there will be a series of deductions, these will include income tax, and also likely include a pension contribution, health insurance and any other benefits you might receive.

Charity employees will receive their net salary into their bank accounts. This is their gross salary minus tax and dedications. This is almost exactly the same as how a private business would pay their employees.

Charities use a proportion of the money they raise to pay the wages of their employees. Most charities publish a breakdown of their different expenses across a range of areas. These will show what percentage of the charity’s money is used for staffing, as well as other running costs. It will also show what percentage of money the charity raises goes directly to frontline programmes. Most charities aim to keep their staff costs below 5% of the total they raise.

If a charity is funded by an external donor, then the staff costs for the specific project will be charged to the donor. Donor organisations will have a set-percentage of their funds that can be used for running costs, including staff wages. This is usually between 15% and 20% of the total grant.

Charities often employ staff to work only on a specific donor funded project. Once the project is over, these staff are let go as the charity does not always have the funds to continue these roles.

Charity Employees Vs Volunteers: The Salary Difference

As we’ve said, charity employees receive a salary for their work. However, there is an important distinction between employees and volunteers in the charity sector, especially in relation to being paid.

Charity volunteers do not receive a salary. Volunteers give their time to a charity because they believe in the cause the charity is working for, as a way to begin a career within the charity sector or as a social activity.

Receiving a salary, or not, is one of the biggest differences between a charity employee and a volunteer.

Volunteers for charities can do a range of tasks. Each charity has specific roles for their volunteers. These often include helping with events, assisting with fundraising, helping with admin tasks, working in the community or providing specific technical advice.

Whatever the tasks a volunteer undertakes for a charity, they do not receive a salary.

Although volunteers for charities do not get paid, many charities do give volunteers a stipend to cover their expenses. A stipend is a small, set amount of money that a volunteer receives to cover their costs. Some charities also offer volunteers a full reimbursement of their expenses. This means they can submit their receipts to the charity and have the exact costs they have incurred refunded to them.

The aim of both a stipend and expenses reimbursement is to ensure volunteers are not out-of-pocket as a result of volunteering for the charity.

There are several reasons why charity volunteers are not paid. For the charity, it provides them with additional, often flexible, staff who can help with their work at little or no additional cost. For the volunteers, it allows them to dedicate their time to help a charity they feel passionate about.