The charity sector is heavily reliant on the time, commitment and expertise of volunteers. In England and Wales, volunteers outnumber charity staff by 3:1. Fundamentally, being a trustee is intended to be a voluntary role. With increased scrutiny on the sector, public reaction to paying trustees is generally negative. However, there are certain situations where paying trustees is justifiable to enable the charity to best achieve its purposes.
The Charity Commission has recently updated its guidance on paying trustees (CC11). It’s essential that your charitable organisation knows and sticks to the rules and manages the risks involved. This will ensure you avoid damaging the charity’s reputation or hindering its ability to deliver.
In this article, we’ve outlined some of the key aspects to be aware of and some of the most common situations where trustee payments crop-up.
The basics
Paying a trustee includes giving:
- Financial rewards, such as money or fees
- Other benefits, such as free use of equipment, property, or access to services that people would normally pay for
The rules also apply if a:
- Trading subsidiary of a charity pays a trustee
- A person or organisation connected to a trustee is being paid
Note: Trustee expenses do not count as a trustee payment in this context.
Connected persons
There are legal rules that cover paying people connected to your trustees too.
A connected person includes:
- A child, parent, grandchild, grandparent, brother, or sister of a trustee
- A spouse or civil partner of a trustee, or of a relative listed above
- A business partner of a trustee, or of a relative listed above
- An organisation in which the trustee or any of the above have a controlling or substantial interest
What situations does the guidance cover?
The refreshed guidance covers the following situations where a trustee payment might occur:
- Paying a trustee (or connected person) for providing goods or services to the charity
- Employing a trustee (or connected person)
- Paying a trustee for carrying out trustee duties
- Compensating a trustee for loss of earnings
- Making small payments or honorariums to a trustee
The guidance covers each of these situations in detail. It’s vital you read and apply the instructions where relevant to your charity.
The factors you need to consider and the steps you need vary per scenario. However, the following core principles run through all:
1. The charity must have the legal power and authority to make payments. This authority may come from the charity’s governing document, from a statutory power, or from explicit permission granted by the Charity Commission upon application.
2. Acting in the charity’s best interests is paramount; any payment to a trustee must be in this context.
3. The conflicts of interest inherent in such arrangements must be carefully identified and considered, with action taken to prevent the conflict from affecting the decisions made by the charity.
4. Recording decisions and the decision-making process around trustee payments is critical.
5. In each case, there will be disclosure requirements in the charity’s public annual accounts. These are complex but usually include the need to disclose the trustee or connected person’s name, the nature and amount of the payment/benefit, and the legal authority under which it’s permitted.
Need some guidance?
If you’re unsure whether making a payment to trustee or connected person is appropriate, we suggest you start by asking, ‘should we?’ not ‘could we?’ In these situations, it’s better to be cautious. Don’t be tempted to cut any corners or bend the rules. The unwanted outcomes of a poor decision can severely impact a charity, affecting public support, which is integral not just to success but survival.
This can be a complex subject to navigate. Burton Sweet has a longstanding commitment to charities and civil society organisations, offering practical, professional and passionate support. We want to play our part, so you can deliver effectively for the communities you serve and show the good you do.
If you require assistance in understanding and acting upon the rules outlined in this article, please contact us and member of our team will be happy help…
