Commission-Based Fundraising – The Good, the Bad and the Ugly

Never have I run a training course, irrespective of the topic, or presented at a fundraising conference, without the question of commission-based fundraising being raised.

The good

Commission-based fundraising is only good for small or financially strapped non-profits or start up organisations with no money to pay a fundraiser.

The bad

• Donors hate anyone creaming off a commission.
• Some donors contractually exclude this practise.
• If large amounts are raised, this could result in the fundraiser out-earning the CEO!
• Most professional bodies for fundraisers globally deny membership to anyone working on a commission basis.
• Due to the feast or famine nature of the income for the fundraiser, they are likely to leave for a salaried position. Non-profits that pay commission have a high turnover of fundraising staff.
• Commission-based fundraising is considered by many to be unethical.
• No matter how it may be disguised, a high payment to a fundraiser would be flagged in annual financial statements.
• With crises such as COVID-19 and some governments helping with part of wage bills, a commission-based fundraiser would not receive much, if anything, as such payments are based on salaries.

The ugly

Consider this: Mary (who earns a commission) does up to 90% of the work on a major application and then leaves the job. John, the new fundraiser, completes the home stretch and the money is raised. Who gets the commission?

• This scenario has often resulted in law suits.
• Bad publicity for the organisation.
• A fundraiser may bring in a large donation and the donor’s contract forbids a commission. This is not a fundraising matter but a labour law issue if the fundraiser’s contract states that they will earn commission.

A commission with a ceiling

Not an ideal solution but the only option if there is no money to pay a fundraiser:

Francis Fundraiser is hired on a commission basis. Her salary should be £40 000 a year (£3 333 per month). GBP are used in this example but the amounts can be converted to any currency in the world, using the average fundraising salary in each country.

Francis is set a target of raising £400 000 and will receive 10% on monies raised. In month one she raises nothing and receives no payment.

Month two – nil and no payment
Month three – nil and no payment
Month four – £10 000 is raised and she is paid £1 000
Month five – nil and no payment
Month six – £20 00 is raised and she is paid £2 000
Month seven – £150 000 is raised and she is paid £15 000
Month eight – £220 000 is raised and she is paid £22 000

As she will then have had her agreed upon year’s income, Francis will be required to keep working for no income for the next four months.

This is fraught with problems as she might leave or a ‘creative’ solution might be found whereby a new 12-month cycle is begun.

Obviously, as Francis will have proven herself, she should become a salaried fundraiser.

A very different picture would emerge if the fundraiser was not successful and raised little money. This may well not be the fault of the fundraiser but that they might be expected to raise money for a cause that is not easily fundable or that they are not supported in their endeavours by not being supplied with information or documents needed.