When and Where to Use Wage Replacement Rates for Volunteer Value

“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” Abraham Maslow

Open any annual report with a volunteer section, or the Corporation for National and Community Service’s Volunteering in America website. You will invariably find the holy trinity of volunteer value: volunteer numbers, hours, and the wage replacement value. These numbers are used so frequently that they form the industry standard for reporting volunteer value. Yet, they are just three of the many ways to articulate volunteer contributions.

Like any tool, there is a time and place for these figures. But not every time or every place. Knowing when and where to use these statistics starts with understanding their benefits and limitations. Since Independent Sector (IS) just released its 2019 value of a volunteer hour, it is a good time to look closer at wage replacement rates.

Using wage replacement rates as volunteer value – a primer

Wage replacement rates are estimates of the wage a volunteer would receive if he or she were working in a paid capacity (such as the IS rate of $27.20/hour). Wage replacement value describes the total value of volunteer time when multiplying the hourly rate by the number of volunteer hours contributed. (If volunteers donated 100 hours, the wage replacement value using the latest IS rate would be $2,720.)

The most common forms of wage replacement rates are from Independent Sector and the U.S. Bureau of Labor Statistics (BLS).

  • The 2019 value released by Independent Sector was calculated by the University of Maryland’s Do Good Institute and recent graduate of the School of Public Policy, Michael Sousane. The team assigns a rate each year for the value of a volunteer hour using a formula to determine a national average wage, as well as rates for each state. The current national hourly rate is $27.20.
  • The BLS site provides wage estimates by occupation for a more accurate estimate of value by role. For example, the average hourly rate for ushers is $11.96 and for passenger vehicle drivers is $17.21. An alternate approach is to use the prevailing market wage. The use of BLS and prevailing wage rates is less common than the rate released by IS.

Beyond the fanfare

The annual release of the rate by IS triggers a host of articles about the updated dollar value specifically and how great volunteers are generally. To a lesser extent, these articles and the IS website (paragraph 5) mention that this rate is just one of many ways to communicate volunteer value.

What I have yet to see in the official releases though, is any mention that these wage replacement rates have a downside. Observations about wage replacement limitations seem to be confined to the volunteer management community (such as Jayne Craven’s insightful critiques – here, here, and here – or the thoughtful roundtable discussion in e-Volunteerism). The recognition of wage replacement limitations and their omission from the broader volunteer conversation are important. We do a disservice to volunteers, our organizations, and our sector to use these rates for all purposes, or without awareness of their risks.

The next section provides an overview of the benefits and limitations of using wage replacement rates as a tool for reporting volunteer value.

Benefits of wage replacement rates

  • The wage replacement rate monetizes volunteer time so that it can be used in financial statements and as an in-kind match for some grants. Nonprofit leaders also can use it for Social Accounting, a sophisticated approach to incorporating volunteer contributions into financial statements.
  • Value is often equated with money. If volunteers offer value to the organization, it seems intuitive that this value can be monetized.
  • The wage replacement rate and value are consistent with the quantitative and financial emphasis that many funders and other stakeholders require. It makes volunteers visible to diverse stakeholders.
  • The wage replacement value provides a sense of the volume of volunteer work contributed to the organization (higher amounts reflect more hours contributed).
  • The IS rate offers a sense of legitimacy because it is calculated annually using an established formula by an esteemed organization with a national reach. The BLS rates also provide legitimacy and a more specific starting point for assigning an hourly rate to volunteer time.
  • Wage replacement values are relatively simple to track and calculate. (Using BLS or market rates is more complicated, but still accessible for many organizations.)
  • The wage replacement value provides a single figure for volunteerism across organizations.

Limitations of wage replacement rates

  • Wage replacement rates favor quantity over quality and activity over accomplishments. This can lead organizations to manage to volunteer data and events rather than mission. For example, we focus on how to increase our volunteer numbers, rather than how we can advance the mission with volunteers.
  • Wage replacement totals can lead to the mistaken conclusion that volunteer value is equivalent to dollars saved. Although engaging volunteers means an organization does not pay wages and benefits to the volunteers, it rarely means that there was money for the roles the volunteers filled that can now be used for something else. Organizations rarely save money because the money was not there in the first place.
  • The widespread use and legitimacy of wage replacement rates can obscure the need to capture volunteer impact in other ways. For example, a colleague who wanted to report on the diverse ways that volunteers impact the mission was told to focus only on volunteer numbers and the IS rate because they are the industry standards.
  • Using a single wage replacement value for volunteerism across organizations gives an illusion of standardization in a sector and activity that are anything but standardized.
  • Wage replacement rates are estimations. The IS rate reduces all volunteerism to one average rate. BLS rates offer more granular estimates, but not all volunteer roles can be translated into a paid position found on the BLS list.
  • Focusing on wage replacement values positions volunteer contributions as an output of the organization (“we have volunteers”) rather than as an input that helps the organization achieve its mission (“we engaged volunteers to meet a purpose”). Put another way, most organizations do not exist to engage volunteers. They exist to meet a community need, which they accomplish by engaging volunteers.
  • The IS rate is a higher hourly amount than many paid staff members make, which can call into question how staff pay is determined.

In the best-case scenario, the use of wage replacement rates helps establish volunteers as a critical and integral part of an agency’s workforce. In the worst case, these rates drastically narrow our understanding of service and lead us to manage to the data rather than mission.

Now what? Considerations for the responsible use of wage replacement values

As with any tool, the key to success is to know when it is appropriate to use wage replacements rates and when it is not. Wage replacement rates are typically appropriate when there is a need to translate volunteer time into financial terms, such as including volunteer time in a grant request as part of the agency in-kind contribution. It also resonates with some stakeholders who think of value in financial terms.

However, wage replacement rates are just one tool among many. We risk damaging the nuance, beauty, and power of volunteerism by swinging a hammer at every aspect of service that is not a nail. Instead:

  • Use wage replacement rates as part of a toolbox of data points. Include other indicators that address how volunteers support the organization in achieving its mission. Link volunteer outcomes with organizational outcomes to demonstrate how volunteer activity leads to organization accomplishments.
  • Be thoughtful about determining if a wage replacement approach is a good fit for your organization. If so, be intentional about selecting the wage replacement rate that works best for your context. Be transparent about your selection and consistent in your application.
  • Be mindful of language. Wage replacement value is not a measure of volunteer impact. It is a measure of volunteer financial valuation or volume.
  • Don’t assume that stakeholders with a financial or funder perspective only want wage replacement rates or other quantitative data. My research (Paper 1, p. 19) found that these folks were interested in other information as well, including stories and data points that address the quality as well as the quantity of volunteer efforts.
  • Avoid positioning wage replacement values as cost savings. Instead, talk about how volunteers help the organization extend the budget, as Susan Ellis and Betsy McFarland advise. Saving money suggests a scarcity mindset and scrimping to get by without adequate resources. Extending the budget suggests that resources are invested wisely to advance the mission.
  • Include organizational context when reporting volunteer data. Educate stakeholders about why you track the data you do and how it influences your strategies. Share what is unique about your volunteer corps or how your staff-volunteer partnership operates.
  • Don’t shy away from talking about the intangible ways that volunteers make a difference to your agency. Often, these intangible qualities get to the heart of why a program or organization exists.

As Andy Fryar noted almost 20 years ago, “the most enduring and controversial question within the field of volunteerism is the one that relates to the ‘value’ of volunteers and the hours they contribute”.

Perhaps we finally can make progress on the volunteer value conundrum by acknowledging the benefits and limitations of our statistics and their impact on understanding volunteerism. Better yet, let’s embrace the difficult yet important work of telling a more holistic volunteer story in new and creative ways.

Sue Carter Kahl, Ph.D., is president of Sue Carter Kahl Consulting.

Types: Blog
Global Topics: Civil Society, Common Goods, Data, Ethics and Accountability, Nonprofit Capital, Volunteerism