Paying Charity Trustees

In the UK, charity trustees typically serve on a voluntary basis and are not compensated for their duties. This principle emphasises that charities operate with altruistic intentions.

The Charity Commission recently updated its guidance, CC11, in respect of paying trustees.  In this article, I summarise some key features from the updated guidance and considerations for charities in paying trustees.

1. Payment for Services or Goods Provided to the Charity:

• Charities have a statutory power (under the Charities Act 2011, as amended by the Charities Act 2022) to pay trustees (or individuals or businesses connected to them) for providing goods or services to the charity, provided these are over and above their normal trustee duties. An example would be a trustee with a catering business providing food for a charity event.
• Several conditions must be met for such payments, including:
  • The charity’s governing document does not prohibit such payments.
  • There is a written agreement outlining the services/goods and the amount to be paid.
  • The trustee being paid does not participate in the board’s decision regarding the payment.
  • The payment is in the charity’s best interests and is reasonable for the goods or services provided.
  • The number of trustees receiving payment or benefits must be in the minority.
  • The decision-making process adheres to the trustees’ duty of care, including identifying and managing conflicts of interest.

2. Payment for Serving as a Trustee:

• Generally, charities cannot pay their trustees simply for being a trustee.
• Payment for serving as a trustee is only permissible in limited circumstances and requires specific authority, which can come from:
  • The charity’s governing document explicitly allows it.
  • Authorisation from the Charity Commission.
  • A court order (in rare cases).
• The Charity Commission will only grant permission if it’s clearly in the charity’s best interests and provides a significant and demonstrable advantage over other options.

3. Reimbursement of Expenses:

• Trustees can and should be reimbursed for reasonable out-of-pocket expenses incurred while carrying out their duties. This is not considered a payment for their services. Examples include travel costs, accommodation, childcare costs to attend meetings, and communication expenses directly related to charity work.
• Charities should have a clear written expense policy outlining what can be claimed and the process for reimbursement.

Key Considerations:

• Transparency: Any payments made to trustees must be transparent and properly recorded in the charity’s accounts and annual report.
• Conflict of Interest: Robust procedures for identifying and managing conflicts of interest must be in place whenever trustee payments are considered. The trustee who stands to benefit should not be involved in the decision-making process.
• Best Interests of the Charity: All decisions regarding trustee payments must prioritise the charity’s best interests.
• Duty of Care: Trustees must exercise reasonable care and skill when deciding on trustee payments.

In conclusion, while exceptions for specific trustee payments exist with authorisation, maintaining the principle of unpaid trusteeship is vital to preserve public trust in charities.

More information can be found here.