The voluntary role of a Trustee for many charities is a vital role to enable the most important decisions to be made. The role of a Trustee does vary and many charities seek to appoint a variety of experts and professionals to bring an invaluable source of knowledge and experience to the board.
However, on occasions, some Trustees may seek to be paid for the work they have completed. When approached by a Trustee with this request, can a charity authorise such a payment? Below, we have provided some information on whether this is possible.
Can a charity make payments to its Trustees?
A charity can pay for the supply of any services that are over and above normal Trustee duties.
Trustees can be paid for providing services (and, in some cases, goods) to the charities for which they are a Trustee. The power to do this and the conditions which the charity must follow in deciding when payment is appropriate, are set out in the Charities Act 2011.
Charities cannot rely on the statutory power to pay their Trustees where:
- The charity wishes to pay a Trustee for serving as a Trustee
- The charity wishes to employ a Trustee or a connected person under a contract of employment
- The charity’s governing document has a strict prohibition against payment for services
- The conditions for making the payment cannot be met
Before paying a Trustee, you must have regards to the Charity Commission’s’ guidance on paying Trustees for services. It explains how you must:
- Produce a written agreement between the charity and the Trustee (or connected person) being paid;
- Specify the exact or maximum amount to be paid;
- Make sure the Trustee does not take part in decisions made by the Trustee Board regarding any aspect of the agreement;
- Agree the payment is in your charity’s best interests and reasonable for the service provided;
- Not allow payments or other benefits to half or more than half of your board – the number of charity Trustees receiving any payment or benefit must be in the minority; and
- Make sure your charity’s governing document doesn’t prevent you from paying Trustees for services.
A duty of care
When deciding to pay a Trustee for services or goods, you must follow your duty of care as Trustees. In practice, this means you should:
- Be clear that the payment can be justified in the charity’s best interests;
- Identify and record conflicts of interest and prevent them from affecting the decision;
- Use reasonable care and skill when making your decision;
- Decide what you will do if the services or goods aren’t satisfactory; and
- Keep records of discussions at meetings and disclose the payment in your accounts.
Although there is no set format, there are certain elements the agreement must contain:
- An accurate description of the service to be provided;
- The name of the Trustee or connected person (including a business) who will receive the payment; and
- Details of the amount, if a ‘one-off’ or fixed-term payment, or else the maximum amount for services to be provided over the duration of the agreement. Where the benefit is a ‘payment in kind’, details of the benefit and its approximate value must be given
There are also specific clauses that should be included alongside restrictions over which Trustees can sign on behalf of a charity. It is imperative that all steps are taken to ensure the decision is made in the charity’s best interests.
How we can help
At Nelsons, we are able to assist in advising charities on their obligations generally, and also specifically in these areas.