Fair Funding and Fair Work: Scottish Council for Voluntary Organisations and TSI Scotland Network

Context 

Scotland has exemplary commitments to becoming a Fair Work Nation and has clear guidance in place on what “fair work” means. 

The five pillars of Fair Work are: 

• Effective voice 
• Respect 
• Opportunity 
• Fulfillment 
• Security 

Scotland’s third sector is supportive of these principles, but can face barriers to implementation due to poor funding practice.  

Examples of common funding challenges faced by the sector include that: funding is often awarded for only one year at a time, making it very difficult to plan for the future; the value of contracts and grants rarely keeps pace with inflation; funding is more readily available for short term projects than ongoing core costs; the funding awarded does not always cover the full cost of a piece of work, such as organisational overheads ; decision making about funding can be slow, and payment of funds can be delayed, leaving third sector organisations uncertain about their future. 

To enable third sector organisations to become Fair Work employers, the Scottish Government must uphold and implement its commitment to Fairer Funding: funding which is long term, flexible, sustainable, and accessible. 

While this paper focuses on Fair Work issues, the funding environment  is also detrimental to the people, communities and causes third sector organisations work with.  Fair Work is central to a sustainable sector which can support staff and volunteers and deliver quality outcomes.   

What is Fair Funding? 

A long-term, flexible, sustainable, and accessible approach to funding. 

The Scottish Government has committed to Fairer Funding for the voluntary sector, including exploring options to implement multi-year funding deals, by 2026. The many benefits of longer term funding are understood and recognised by the Scottish Government and parties across the Scottish Parliament, but there has been little progress on implementation.  This commitment is welcome, but Fair Funding is more than multi-year settlements.  Full details of our Fair Funding asks, based on many years of engagement with the third sector, can be found elsewhere.  This paper provides information on how our calls for long-term, flexible, sustainable and accessible funding impact on the third sector’s implementation of Fair Work. 

Long term funding 

To ensure security and reduce wasted capacity, the third sector needs a longer-term funding model. 

Despite a cross-party commitment to multi-year funding for the third sector, short-term contracts and grants – often for one year or less – are still the norm. These short-term financial arrangements impact employers, employees, volunteers, and the people and communities voluntary organisations work with across Scotland. 

Impacts for employers 

• Unable to offer secure jobs; contracts can only be fixed term for up to a year.
• An annual cycle of issuing redundancy notices, rescinding them if funding is granted, or losing skilled and experienced staff, only to recruit again if the money comes later. 
• Losing skilled and experienced staff to similar jobs in the public sector or different jobs in the private sector. 
• Facing barriers in recruiting, retaining, and developing staff and volunteers. 
• Work and services can’t be planned beyond a very short period of time. 
• Staff in funded posts look for other, more secure work from the outset. 

Impacts for employees 

• No job security. 
• Unable to access mortgages or even enter new rental agreements. 
• At risk of redundancy on at least an annual basis. 
• Low morale for both employees and volunteers who feel undervalued and live with continual uncertainty. 

Sustainable funding 

A sustainable sector needs sustainable funding practices and approaches, including annual inflation-based uplifts and support for the Real Living Wage. 

 
Where projects or activities continue for longer than a year, very many grant and contract agreements contain no uplift to recognise increasing costs, yet expect the same or more to be delivered.  This undermines Fair Work in the following ways: 

Impacts for employers 

• Inability to keep pace with salary increases in other sectors.
• Losing good staff to similar jobs in the public sector or losing them to different jobs in the private sector. 
• Volunteer expenses rise without additional resource to cover this.

Impacts for employees 

• Pay erosion, and increasing disparity with similar jobs in the public sector where the terms and conditions are also usually better 
• Low morale and feeling they’re not providing the best service to the people they support or being unable to meet demand 

Flexible funding 

The third sector needs the stability of unrestricted core funding to plan ahead and to offer secure employment in core posts. 

 
Third sector funding is often restricted to specific projects or outcomes, meaning that while organisations secure funds for specific projects, they struggle to meet core costs for bills and vital roles.  Employment overheads including staff training and redundancy costs can be difficult to secure. Restricted funding can also be prescriptive on how the work is carried out rather than allowing the organisation to apply ongoing learning and modify approaches to better achieve the desired outcome. 

Impacts for employers 

• Staff on fixed term contracts accumulate a statutory right to redundancy payments after 2 years; there is no provision for this in grant funding. 
• Funding for pay awards, learning and development (including mandatory training) or other core costs, such as pension contributions, is not awarded. 

• Having staff tied to a specific project restricts employers’ ability to redeploy staff if a crisis or new need arises, or to cover staff sickness. 

Impacts for employees 

• Less likely to take out pension provision. 
• Less likely to access learning and development. 
• Impact on fulfilment as they cannot apply learning to develop new approaches and achieve outcomes. 

Accessible funding 

The sector needs streamlined and consistent approaches to accessing funding to ensure a level playing field for all organisations, and application processes which honour timescales on notifications and payments. 

 
Delays in the timeframe of awarding grants and making payments are common, and it is often the case that funding streams are over-subscribed, in part because the criteria for the fund are not tight enough. There is a significant issue for organisations when funding decisions are delayed but funds still have to be spent by the end of a financial year, impacting employers and employees.  

Impact for employers 

• Recruitment can’t begin in time to start the work at the start of the financial year or funded period, which in turn means a shorter period of activity therefore less benefit to people or communities. 
• An annual cycle of issuing redundancy notices, rescinding them if funding is granted, or losing skilled and experience staff only to re-recruit if the money comes in later. 

Impact for employees 

• At risk of redundancy on at least an annual basis. 
• Mental health impact on staff and managers. 

Implications for Fair Work 

The cumulative effect of these funding practices undermines Fair Work in the third sector in the following ways: 

Security

A lack of job security is one of the biggest causes of low morale, sickness absence, and attrition. This impacts both the employee and the employer. In practical terms, it negatively impacts on people’s ability to have secure housing and to make provision for their future in terms of both career development and pensions. Short term, insecure jobs with low salaries are difficult for employers to recruit. This can have a mental health impact on staff whose role is insecure, managers who are dealing with stressful periods of uncertainty/redundancy/inability to recruit, and colleagues who face additional burdens when colleagues leave for more stable employment or can’t be recruited. 

Fulfilment

If a member of staff is constantly anxious about the potential of losing their job, they are less able to focus on job satisfaction and their own development, because they are focused on the short term need to find secure employment. The voluntary sector offers work that can be fulfilling and meaningful, but this should not be at the expense of job and financial security. Being unable to guarantee consistent, quality services to their often vulnerable clientele undermines a sense of fulfilment in the day-to-day work. 

Opportunity

An endless cycle of short-term posts leaves little opportunity for stability and development, let alone career progression. It leaves the employer unable to invest in medium to long-term workforce, or organisational, development and it leaves the employee looking for opportunities elsewhere, even if it is doing a job that may be less fulfilling. 

Respect

Treating staff as dispensable on an annual basis and not offering the security, fulfilment, or opportunity they should be able to expect shows little respect for them or their families. Similarly, treating the work done by voluntary organisations as dispensable does not reflect the rhetoric about the sector being an integral part of Scottish society and the economy. 

Effective Voice

Most voluntary organisations are small and are not unionised. Most strive to be supportive, values-based workplaces who listen to staff and encourage them to have a voice. However, employees worried for their future employment are less likely to speak up.  

Our asks  

Fair Funding is a long term, flexible, sustainable and accessible approach to funding that is central to the sustainability of the third sector, achieving Fair Work, supporting volunteers, and delivering quality outcomes for people and communities across Scotland.  SCVO’s paper Fair Funding for the Voluntary Sector outlines in detail the actions that Scottish Government needs to take to make fair funding a reality for third sector organisations across Scotland. 

To progress towards Fair Work the Scottish Government needs to work across departments, with local government, funders, and crucially, the sector, to ensure that third sector organisations have the support they need. 

In particular, the Scottish Government must: 

• Implement its commitment to multi-year funding of three years or more, across all Scottish Government departments. 
• Ensure that all multi-year funding arrangements have annual uplifts built in, at a level as close to inflation as possible, and that mechanism exist to renegotiate in times of rapid and unexpected inflationary increases.  
• Ensure that all public grant funding and procured contracts have both the Real Living Wage and annual uplifts to the Real Living Wage built into the amount awarded.  
• Ensure that funding decisions are issued no later than December and funds paid no later than the start of the tax year in April to prevent funding gaps and uncertainty.
• Ensure that funding decisions are taken and communicated within agreed timescales. 
• Work with the voluntary sector to ensure that good practice is highlighted and shared. 
• Calculate what proportion of grants and contracts are delivered on a multi-year basis, uplifted to keep pace with inflation, and accommodate payment of the Real Living Wage. 

About SCVO 

The Scottish Council for Voluntary Organisations (SCVO) is the national membership organisation for the voluntary sector (sometimes refered to as the third sector). We champion the role of voluntary organisations in building a flourishing society and support them to do work that has a positive impact. 

Along with our community of 3,500+ members and supporters, we want to see thriving charities, social enterprises, and voluntary groups at the heart of a successful, fair and inclusive Scotland. Find further details about SCVO at scvo.scot. 

Our policy team work closely with the third sector, the Scottish Government, COSLA, and the Scottish Parliament on a wide range of issues relating to the voluntary sector’s operating environment, including funding, regulations, and the sector’s role in Scotland’s economy. 

About the TSI Scotland Network 

The TSI Scotland Network is a body of charities that support the third sector across Scotland. There are 32 TSIs – or Third Sector Interfaces in Scotland, one for each local authority area. Some are partnerships working across large urban and geographical areas, some combine all the functions of the TSIs’ work under one roof. Find further details about the TSI Scotland Network at tsi.scot.