Charity Commission publishes updated guidance on charities paying trustees

At the end of April, the Charity Commission published new guidance on ‘Charities paying a trustee or a connected person: understand the rules (CC11)’. The legal framework governing paying charity trustees has not changed - the aim of the new guidance is to make it clearer, easier to use and to help trustees navigate the law and assist charities in making informed decisions regarding trustee remuneration.  

Emphasis on trusteeship being a voluntary role

The guidance re-emphasises that trustees are volunteers and will not usually be paid. The Charity Commission says that this is what makes the charity sector unique and promotes trust and confidence in charities.

Guidance separated into sections covering different payment scenarios

The new guidance is separated into sections covering different payment scenarios: 

• Paying a trustee or a connected person for providing goods or services to the charity

The guidance sets out six legal conditions which must be met when paying a trustee or connected person for goods or services: 

1. Your charity’s governing document must not contain a prohibition.
2. Getting the goods or service from the trustee or connected person must be in the charity’s best interests.
3. The amount you agree to pay must be reasonable.
4. There must be a written agreement with the trustee or connected person.
5. Only a minority of trustees may be paid at any one time.
6. A conflicted trustee must not take part in any discussion or decisions about the arrangement.

• Employing a trustee or connected person
• Paying a trustee for carrying out trustee duties
• Compensating a trustee for loss of earnings
• Paying trustees: other types of payments 

Each section starts with a statement that the voluntary nature of trusteeship makes the charity sector unique and promotes trust and confidence in charities and says that, as a result, the reaction externally to trustees being paid is often negative.

The guidance has been updated to help trustees think through the issues and risks associated with paying a trustee or connected person and to help them determine if they have the necessary powers to make such a payment, or if they will need to approach the Charity Commission for authority.

Trustees should be careful to manage any potential conflicts arising from trustee payments by following the provisions in their governing document and their conflicts of interest policy. The guidance reminds charities that they must record decisions to pay trustees carefully, including the rationale and management of any potential conflicts of interest. It may be useful to refer to the Commission’s guidance on decision making for charity trustees (CC27). There is an obligation to disclose payments to trustees or connected persons in the charity’s annual accounts, promoting transparency and accountability.

The guidance says that paying a trustee for carrying out trustee duties should only be considered in exceptional circumstances and for a temporary period of time, when paying a trustee would clearly bring a significant advantage to the charity over other options. It warns charities that a paid trustee may become too influential which risks making it challenging for them to comply with their legal duties.

Trustee expenses

The guidance on trustee expenses, previously included in CC11, has been removed and is now a separate piece of standalone guidance: ‘Trustee expenses: what charities can pay’.  Paying expenses (e.g. travel, accommodation, etc.) to trustees is not a trustee payment or benefit. This is because trustee expenses do not constitute trustee payments, as trustees are entitled to have their reasonable expenses reimbursed by their charity. The guidance also states that reasonable costs that enable a person with disabilities to carry out their trustee role or reasonable costs for a carer or childminder may be considered an expense.

The Commission suggests that charities should think about whether they should encourage trustees at their charity to claim their expenses, to avoid them stepping down for financial reasons. Charities should have a trustee expenses policy in place, setting out what expenses the charity will pay for and the procedure required for authorisation and payment.