The key principles of trust and charity law are that trustees are not allowed to benefit from their role as trustees and must not put themselves in a position where their personal interests conflict with their duty to act in the charity's best interests unless they're authorised to do so.
This is important for public trust and confidence in charities in the charitable sector more generally. It follows from this that a trustee is generally not able to receive a payment from their charity (which would be an obvious financial benefit) or to be employed by their charity (because they may have used their role as a trustee to acquire employment, which would be a trustee benefit).
That said, there are a number of circumstances in which payments by a charity to its trustees are permitted, including some which can be used as a tool to facilitate trustee recruitment and greater diversity on the trustee board. Trustee boards need to be aware of the circumstances in which payments can and can't be made to trustees.
Below, we look briefly at some of the circumstances in which payments can be made to trustees, as well as touch on the potential of employing trustees. This can be a complicated area, but one which is vital to get right – payments without authorisation could be considered non-charitable expenditure, and the trustees could be liable to reimburse the charity for the payment made.
The Charity Commission cannot generally authorise retrospective payments, only new or continuing payments. Where relevant it is therefore important to make applications for consent in advance of payments being made.
Can a trustee be paid for goods and services?
Payment can generally be made to a trustee for goods and services they provide to their charity over and above their trustee duties. Examples might be a trustee who runs a painting and decorating business and is paid to redecorate a building or a trustee who is a professional caterer providing food for an event. The power allowing this is set out in the Charities Act 2011 (for those of you keen on some light bedtime reading – it's section 185!). However, this statutory power will not override a prohibition within the charity's governing documents, so check there first.
Certain conditions must be met when making such a payment, such as requiring a written agreement and allowing only a minority of trustees to benefit at any one time. So please be sure to check the procedure required as soon as possible if such an arrangement looks relevant.
Can a charity trustee claim expenses?
Most people are familiar with the power of a charity to reimburse trustees for their reasonable costs in carrying out their duties. Obvious examples would include travel expenses, both in relation to trustee meetings and on trustee business, refunds for the costs of meals taken while on charity business (though, of course, this would be only to a reasonable level), and the reasonable costs of childcare or the care of other dependents whilst attending trustee meetings.
However, legitimate expenses go beyond those and include communication support, such as translating documents into Braille for a blind trustee or into different languages, special aids for people with hearing impairment, the cost of buying training materials and publications relevant to trusteeship, and providing appropriate specialist transport for a trustee with a disability.
Ensuring that all appropriate expenses are reimbursed might be all that is necessary to open the trustee board to a wider group of potential trustees and enable a diverse trustee board with all its benefits.
Can trustees be compensated for the loss of earnings?
There may be cases where expenses alone aren't enough to allow an interested individual to act as trustee if, for example, a trustee is left out of pocket due to their role. In some circumstances, a trustee can be compensated for this, but Charity Commission consent or specific provision within a governing document would always be needed.
The Charity Commission would expect that the payment is in the charity's interests. For example, where the trustee brings a particular skill or perspective which is of value to the charity, where the potential trustee cannot afford to serve because their employer does not pay for time spent on charity business during working hours, or perhaps if the potential trustee is self-employed and would lose out financially by carrying out trustee duties in normal business hours. The charity would need to demonstrate that an alternative trustee couldn't provide the relevant advantage without payment. The trustee board could think about other options, such as holding meetings outside usual working hours or allowing online meetings to avoid the disadvantage.
While this might be a helpful mechanism, the trustee board should be aware that it might not be the answer to the difficulty. For example, the compensation that the charity could pay might not match the actual loss to the trustee, and differing treatment across the trustee board might present problems for dynamics within the board.
Can trustees expect payment for trustee duties?
In limited circumstances, a trustee board can also pay a trustee for carrying out trustee duties. This would require authority either within the charity's governing document, the Charity Commission, or the court.
Payment for trusteeship would usually only be permitted where a charity's operation is very complex, resulting in an unusually high burden of trusteeship or a higher degree of responsibility. This payment might be one way in which you could overcome difficulty in recruiting trustees.
That said, permission is not easy to obtain, and trustee boards would need to be able to demonstrate the steps taken to recruit trustees without payment, and explain (among other things) why there are advantages in paying a trustee rather than using other methods of reducing the burden on that trustee, and determine whether the functions required are truly those that ought to be carried out by a trustee (rather than an employee or consultant).
Can the charity employ a trustee?
We have mentioned above the ways in which trustees can receive a payment directly related to their trusteeship. However, sometimes, an employee role might arise within the charity that seems perfectly suited to a trustee (or someone connected with a trustee). As mentioned earlier, a serving trustee is generally unable to be employed by their charity, but there are circumstances in which such employment would be permitted, either by the Charity Commission or within the governing document.
There are many things to think about here, and even if the trustee might bring significant skills, that doesn't mean an internal appointment will be best for the charity in the round.
However, if new roles or advertising for existing roles where a trustee might be an appropriate person are created, an open and transparent recruitment process must be run. The relevant trustee shouldn't be involved in that process or the design of the individual role, and the role itself must be designed around the needs of the charity, not the relevant trustee's skillset.
If applying to the Charity Commission for consent, the trustees must show (among other things) that the post is required for the charity, that the individual has the appropriate knowledge and skills for the job, and that risks have been identified and can be managed.
In some circumstances, the relevant trustee might intend to continue in their role as a trustee as well as being an employee. In these circumstances, the Charity Commission would need to know why this is necessary and the arrangements in place for managing conflicts of interest, for example, in relation to pay reviews and appraisal processes.
Summary
The most important things to take from this article are:
- There are many circumstances in which trustees can receive payments from the charity and provide services to the charity on a one-off or ongoing basis;
- The first place to start in terms of checking whether such a payment would be appropriate is the governing document, and you should always check this early on so you can get consent if necessary;
- Check whether Charity Commission consent is required (it usually will be);
- Effective management of conflicts of interest is essential, whatever the payment and
- Payments must always be in the best interests of the charity.
