Smaller charities risk falling behind in the battle for talent, new research reveals

New research from the Association of Charitable Organisations (ACO) has found that smaller charities providing financial and wellbeing support to individuals face a growing challenge in building the kind of employment offer needed to attract and retain staff.

The ACO Salary Benchmarking and Working Patterns Report 2026, produced in partnership with Merrifield Consultants, draws on responses from 41 member organisations. It finds a significant gap in pay and benefits provision between the smallest charities and their larger counterparts, one that risks putting smaller organisations at a structural disadvantage when competing for talented people.

A growing gap in benefits provision

The disparity is most pronounced in benefits that candidates increasingly expect as standard. Mental health and wellbeing support is offered by just 18% of charities with an income under £1m, compared with 70% of mid-sized and larger organisations. Enhanced parental leave shows an equally stark difference, with 18% of the smallest charities providing it, rising to 70% among those with income above £5m. Enhanced pension schemes, offered by 80% of organisations overall, drop to just 45% among the smallest charities.

Pay: the structural challenge facing smaller organisations

The pay data tells a similar story. CEO salaries range from an average of £77,000 in charities with income under £1m to £120,000 in the largest organisations, with annual income in excess of £5m. The scale of that difference becomes even more apparent when set against organisational income: for the smallest charities, CEO pay represents around 15.4% of total income, compared with just 1.6% for those above £5m. That is not a reflection of what individuals are paid but of the very different financial realities smaller organisations operate within, and the limited headroom they have to invest across the rest of their employment offer.

Across all responding charities, pay awards averaged 3.3% in 2025, broadly in line with inflation, with anticipated awards for 2026 slightly lower at 3.1%. Nearly two thirds cite cost of living as the primary factor in pay decisions. Only 2.4% cite market competitiveness or staff retention, pointing to the difficulty smaller organisations face in keeping pace with what the wider labour market is offering.

Donal Watkin, Chief Executive of ACO, said:

“Charities providing financial and wellbeing support to individuals are working in an increasingly complex environment. Demand for support continues to grow, costs are rising, and the competition for talented staff has not eased.

What this research makes clear is that smaller organisations face a particular challenge. They are committed to their people, that comes through strongly in the data, but they often have fewer resources to build the kind of employment offer that allows them to compete on equal terms. We hope this report gives trustees and leaders the evidence they need to make the case for investing in their teams.”

Stuart Milliner, Head of Merrifield Consultants, said:

“This data reflects what we see consistently in the market. Smaller charities are deeply committed to their people, but they are often constrained in the employment packages they can offer. When candidates are comparing opportunities, the differences in benefits provision highlighted in this research can become a decisive factor.

What is encouraging, however, is that purpose, flexibility and organisational culture remain incredibly powerful attractors. These are strengths that many charities already have in abundance and which do not necessarily require significant financial investment. That said, the data also highlights a structural challenge for the sector that cannot be ignored.”

About the report

The ACO Salary Benchmarking and Working Patterns Report 2026 is available to download free for ACO members here. Non-members can purchase a copy of the report, priced at £45, by contacting info@aco.uk.net.