Social enterprises are unique because they exist to create impact through trade. Purpose is at the heart of the social enterprise model, but it can be hard to quantify or explain. Certification provides confidence that the social enterprise model really does create social or environmental impact through trade.
This position statement is a part of a series focusing on different business aspects of social enterprise. We aim to unpack tricky subjects, debunk myths and where applicable, highlight any of our relevant policies.
Wages are a highly discussed topic across sectors and industries. Around the world there is ongoing publicity that highlights concerns around modern slavery, exploitation of workforces and disparities in income.
When it comes to social enterprises there can be the expectation that they go above and beyond on wages, by virtue of their model – doing business for good. Wages are a complex area in general and for social enterprises there are unique circumstances that further affect approaches and perceptions.
We know that as social enterprises we must value staff, ensuring that they are being paid fairly, especially for those that are marginalized or prone to exploitation - for example, people with a disability. We also know that social enterprises need to attract talent and skills to the team.
As a group of international social enterprise certifiers and standard setters, we all recognize that we want to be more effective in creating transparency and understanding around these points. Giving the issue more prominence can assist and empower those that work in social enterprises, as well as create confidence in the ‘social enterprise brand’ for customers. Across social enterprise certifications in Australia, Canada, New Zealand, the UK and USA - there are standard principles that we apply around wages.
The focus for all certifiers is on the broader remit and raison d’etre of a social enterprise i.e. evidencing social, cultural and environmental purpose being at the heart of the business. However, all certifiers include some form of ‘sense check’ on wages for example, through self or public declarations, and understanding pay policies and challenging ‘out of the ordinary’ pay levels where they are visible. However, wage audits and verification, which are not checks mastered in the regular domain, are not a pass-fail criterion of social enterprise certifications. Amongst the certifiers there are several consistent issues and questions that arise around wages.
Concerns of underpayment
For some certifiers, stakeholder underpayment has now become a key issue particularly for the most vulnerable employees and where there is no minimum wage legislation as a safety net, as is so in the US, where minimum wage varies by state. Other concerns of underpayment have arisen in Australia where many social enterprises pay employees with a disability an acceptable productivity-based rate. Although lower than minimum wage, these rates are consistent with legal requirements and enable these individuals to have employment where they otherwise might not attain it. While this is an ongoing subject of debate in Australia, solutions have and continue to be developed to equalize outlier wages.
Disparity in salaries
A further consideration is very high salary payments, with a focus on the pay differentials between highest and lowest paid staff. Across all certifiers this is not an easy assessment and there are a variety of considerations at play including the sector of the organization. For example, in the UK there is a need to set salaries to attract locum GPs in the NHS, while other industries face similar shortages of skills which can affect wages. In the UK, the certification (gold standard) considers pay differentials between highest and lowest paid staff but doesn’t have a pass/fail approach, rather a collective scoring on a number of ethical issues.
Paying yourself is not at odds with social mission
All certifications also report the issue of founder underpayment which has largely fallen under the radar. At times each of the certifiers has encountered social enterprises founders, particularly amongst younger generations, who are uncertain as to whether they can draw a wage and how this would be viewed in the certification assessment. This is a fundamental misunderstanding of what social enterprise is about. Social enterprise has to become a sustainable business, nobody can afford to work for free ongoing and indeed this may mask underlying viability issues. On the other hand, we expect social enterprises not to be duplicating the ‘fat cat bonus’ and huge pay differentials that have dogged other sectors.
Some social enterprises, where their business model allows for it go over and above legal obligations, while others resource wages within their means and in line with minimum or legal requirements. Aside from a sense-check there are no hard and fast rules around payment of wages in social enterprise certification. The variations in legal context, industry and workforce means there are different and valid approaches. Ultimately, we should be looking at what social enterprises can achieve within their own industry and national context.
For seekers and stakeholders of certification the issues around wages may affirm or challenge assumptions and experiences. The local certification bodies are a resource to tap into as questions and issues arise.
Contributors to this article are SE Mark CIC, Ākina Foundation (New Zealand), Buy Social Canada, Buy Social USA, Society Profits, and Social Enterprise UK.
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