Trustees are volunteers. We don’t get paid for the role that we perform, and we know this. It’s what we sign up for. We become trustees because we want to help. To support a charity that shares the same values, and that we feel we can bring our skills, experience, and knowledge to.
However, as trustees take on more responsibility and provide more services, when does it become OK to pay a charity trustee or a connected person? And how do you manage this in line with your charity’s governance?
Charity Commission
The Charity Commission has updated and revised its guidance on paying trustees (CC11) because, as most charity managers will be aware, paying a trustee (or someone connected to them) is not always straightforward, even if it feels justified.
As a result the revised guidance now helps clarify:
- When and how payment is allowed
- What counts as a “connected person”
- What evidence is needed to stay compliant
- How to avoid conflicts of interest or reputational risk
What counts as a “connected person?”
A connected person is any individual (family member or friend) or organisation (where a trustee may hold shares or is associated) that is closely linked to a charity trustee.
It is essential to be aware of connected persons in order to manage potential conflicts of interest and maintain complete transparency in all reporting and compliance.
What evidence is needed to stay compliant?
If the charity has decided to make a payment to a trustee or connected person:
A record of any meetings or discussions with full notes and detail must be taken.
- Reason for payment outlined.
- Details must be provided in the charity accounts (you may need to disclose the name of the trustee or connected person you paid) which will become public information.
- Reference to your charity governance documents and policies.
When and how payment is allowed
On some occasions, charities can and do pay their trustees or connected persons’ expenses that they believe are reasonable for them to perform their role or for work that is in the best interests of the charity.
Payment can be in the form of financial rewards or other benefits, such as free use of equipment or free access to services (all of which must be recorded for full transparency).
Types of trustee payments include:
Paying trustees for providing connected goods or services to the charity – if the goods or services provided to the charity are in the best interests of the charity and meet the charity’s charitable purpose, payment to trustees can be made. These payments must be reasonable, you must have a written agreement beforehand, the decision must be recorded and conflicts of interest managed, and your charity’s governing documents must not contain a prohibition, or you must have approval from the Charity Commission.
Goods and services in this sense could include hiring premises linked to the trustee, purchasing food for a charity event, trustees or connect persons’ providing administrative support, or building or plumbing work, for example.
Note: Discussion and decisions made about use of external services and products should not involve any conflicted trustees.
Employing a trustee or connected person – this decision must be in the best interests of the charity, and the charity must have prior written permission from the Charity Commission as they too will need to decide if this is the charity’s best interest. You will also need a robust strategy and a clear communication plan on how you will manage potential conflicts of interest and negative publicity.
The decision must be fully recorded, including minutes from the meeting, and all trustee payments should be disclosed in your accounts.
The decision to employ a trustee or connected person should be based on the best person for the job, the pay should be reasonable, and you should have in place the capacity to manage risks.
Note: No payment should be made until approval is received from the Charity Commission.
Paying a trustee for carrying out the trustee role – in most cases you cannot pay a trustee to do the job of a trustee; however, in exceptional cases you may be able to pay a trustee for their work on the trustee board. This is more common in charities with significant public services or complex operations. But you will need to apply to the Charity Commission for permission to do so and you’ll need to be able to prove that:
- Paying the trustee will benefit the charity
- You have explored alternatives
- Conflicts of interest are being properly managed.
You are allowed to pay a trustee’s reasonable expenses, for example for travel to attend trustee meeting etc. To assist in this area it is recommended that you have a clear trustee expenses policy which details what expenses a trustee can claim and the process for doing this.
Compensating a trustee for loss of earnings – if a trustee loses income by attending a meeting or performing a task, the charity may compensate them, but only if it’s allowed in the governing document or you get Commission authority.
Example: A self-employed trustee gives up paid work to attend a two-day strategy session. But remember:
- The loss must be evidenced.
- The charity must show the benefit outweighs the cost.
- The amount must be reasonable and agreed in advance.
Paying trustees: other types of payments:
- Buying or renting land. Is this in your charity’s best interests? Do you have power of authority? What are your company laws?
- Small payments can be made, for example, as a thank-you gift for a retiring trustee. However, these can’t be extravagant or over a set amount. They should also be pre-agreed and recorded in accounts.
How to avoid conflicts of interest and reputational damage
Be open, honest, and transparent in all your decision making. Decisions should be formally recorded and minuted, payments should be included in all accounts, with full details, and in some instances names.
- Ensure your charity’s governing documents, policies, and guidance are up to date and hold no prohibitions.
- Ensure you have Power of Authority to act, and all decisions are made in the best interests of the charity.
- Seek authority from the Commission.
If you don’t follow the outlined guidance, payments can be deemed unauthorised, and the charity can face severe consequences, as well as damage to its reputation.
(Check out our post on Types of Conflicts of Interest, to find out more.)
Paying charity trustees
There are both pros and cons to paying trustees.
The most significant pros: paying trustees reasonable expenses helps to keep them on board and avoids losing their skills and experience.
However, this is fast counteracted by the fact that public perception can be negative and the risk to reputational damage significant.
When considering paying a Trustee for products or services everything must be taken into account. All conditions must be met, and full transparency should be provided.
Trustees have a duty to act in the charity’s best interests, and the revised guidance clarifies how to stay within the rules while making confident and informed decisions.
If you’re unsure whether your charity’s arrangements are compliant, make now the time to review your policies and procedures.
