When and Where to Use Wage Replacement Rates (or Not) for Volunteer Value (Updated 2021)

There is a time and place for volunteer numbers, hours, and financial value. But not every time nor every place.

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 “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.”  Andy Fryar

This enduring question comes to the forefront each year during National Volunteer Month when Independent Sector releases its annual update of the financial value of a volunteer hour. This dollar value is frequently combined with volunteer numbers and hours to form an industry standard for reporting volunteer value. Yet their common usage does not mean they are the only, or even best, way to share volunteer contributions. In fact, there are many ways to capture the value that volunteers bring to their organizations.  

Like any tool, there is a time and place for volunteer numbers, hours, and financial value. But not every time nor every place. Knowing when and where to use these statistics starts with understanding their benefits and limitations.

Using wage replacement rates as volunteer value – a primer

Wage replacement rates are estimates of the United States wage a volunteer would receive if he or she were working in a paid capacity (such as the IS rate of $28.54/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 $2,854.)

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

  • The 2020 value released by Independent Sector was calculated by Nathan Dietz of the University of Maryland’s Do Good Institute. The Do Good Institute 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 $28.54.
  • 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 $12.69 and for passenger vehicle drivers is $17.93. An alternate approach is to use the prevailing market wage. The use of BLS and prevailing wage rates is less common than the use of the IS rate.

Beyond the fanfare

The annual release of the IS rate 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 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 Engage Journal). 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 insight into the volume of volunteer work contributed to the organization (higher amounts reflect more hours contributed). This provides a fuller sense of the labor needed to advance the organization’s mission.
  • 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. Or in 2020, when volunteer numbers dropped precipitously in agencies, some organization leaders questioned the merit of having a Volunteer Director on the team and/or cut the position rather than adapting volunteer engagement.
  • 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 volunteer roles to one average rate, which can erase the diversity and nuance of volunteer contributions. 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.
  • Wage replacement rates limit the value of volunteers to the labor they provide. They omit the other tangible and intangible contributions that volunteers make.
  • 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 and diminish 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 suitable when there is a need to translate volunteer time into financial terms, such as including volunteer time in a grant request as the agency’s in-kind contribution. It also resonates with some stakeholders who think of value in financial terms.

However, wage replacement rates are just one approach to volunteer value among many. We risk damaging the nuance, beauty, and power of volunteerism by reducing it to the lowest common denominator. 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 team or how your staff-volunteer partnership operates. (This point will be especially important since many agencies are seeing their volunteer efforts fluctuate throughout the pandemic.)
  • 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 question of volunteer value endures. Perhaps we finally can make progress on the conundrum by acknowledging the benefits and limitations of our statistics and their impact on understanding volunteerism. Doing so will support us in engaging with the difficult yet important work of telling a more complete volunteer story in new and creative ways.

 

 

Sue Carter Kahl

Sue is the President of Sue Carter Kahl Consulting and has 25 years of experience in the nonprofit and philanthropic sectors. Her work is infused with lessons learned as a volunteer center executive, state service commissioner, nonprofit board member, staff member, volunteer, and researcher. Her current projects include teaching volunteer engagement and translating her research on the value that volunteers bring to organizations into practitioner-friendly resources. Sue has a PhD in Leadership Studies and is committed to bridging practice and theory in the volunteer field.
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