The Charity Commission’s newly revised guidance on paying trustees, published on 25 April, brings welcome clarity to an area that continues to present considerable regulatory and practical challenges for charities. As a law firm specialising in charity law, trustee payments are a frequent topic of enquiry, and for good reason. While the principle that trustees act in a voluntary capacity remains central to charity law, real-world complexities often mean that charities find themselves asking whether, and how, they can lawfully remunerate a trustee or a connected party.
The redesigned guidance, known as CC11, not only provides greater clarity but also adopts a more user-friendly structure, helping trustees navigate this complex area. At the heart of the new guidance is a reaffirmation of the voluntary nature of trusteeship, which the Charity Commission considers to be a cornerstone of public confidence in the charity sector. The Commission is clear that while payment to trustees may sometimes be permissible, it must always be approached with caution and within a clear legal and governance framework. Trustees must start from the assumption that their role is unpaid and should only deviate from that where absolutely necessary and properly authorised.
Clarified Scenarios and Stronger Emphasis on Legal Authority
The updated guidance now offers a clearer breakdown of the different scenarios in which a trustee, or a person or organisation connected to them, might be paid. This includes being paid for providing goods or services, loss of earnings, employment by the charity, or being paid directly for carrying out trustee duties. In each case, the Commission sets out the specific considerations and legal authorisations required, whether that authority is already in the charity’s governing document or needs to be sought from the Commission itself. This is especially helpful, as charities sometimes mistakenly believe that informal board agreement or a perceived “common sense” approach is sufficient. In fact, unauthorised trustee benefits can amount to a breach of trust, potentially leading to regulatory action and reputational damage. The revised guidance makes it clear that proper authority must be in place before any payment is made, and that a clear record of decision-making is essential.
Managing Conflicts of Interest
A key theme running through the guidance is the need for careful management of conflicts of interest. Paying a trustee or a person or organisation connected to them brings an inherent conflict, and charity boards are reminded of their duty to demonstrate that any decision to make a payment is in the charity’s best interests. This includes comparing other available options, documenting why the payment is necessary, and ensuring that any negotiation on terms is done at arm’s length, with the conflicted trustee absent from the discussion and decision-making process.
This is an area where well-meaning boards can trip up. For example, a trustee might offer professional services at a discounted rate, genuinely intending to benefit the charity. However, without proper authority and conflict management, the payment could still be unlawful. The new guidance goes further in highlighting these risks and setting out practical steps to mitigate them.
Reasonableness, Influence and Reputational Risk
Another useful addition is the Commission’s more explicit warning about the risks a trustee payment arrangement might create for the charity. Even if a payment is lawful and authorised, the perception (and potential reality) of undue influence can compromise board dynamics and decision-making, and risks of negative public perception of trustee payment arrangements. The Commission is keen to remind charities that public perception matters – in the Commission’s view the voluntary nature of trusteeship is part of what distinguishes the sector and fosters trust.
Charities are also advised that any payment must be reasonable and proportionate. This includes a proper assessment of market rates, the charity’s financial position, and the overall impact on governance.
Conclusion
The updated guidance is not a shift in regulatory stance, but rather a much-needed improvement in clarity and usability. Trustees and charity advisers alike will benefit from the practical structure and more explicit instructions. As legal advisers to the charity sector, we continue to stress the importance of robust governance procedures, appropriate legal authority, and proactive conflict of interest management when trustees are considering any trustee payment arrangement.
Ultimately, the message remains the same: trustee payments are exceptional, not routine. Charities must tread carefully, seek advice where necessary, and always prioritise the charity’s best interests above all else.
How can Tozers help?
Navigating trustee payments can be complex, and is a ‘red flag’ area of compliance for trustees as getting it wrong can expose your charity to significant legal and reputational risks. Our specialist charity law team can guide you through the process, whether you are considering a trustee payment, reviewing your governing document, managing conflicts of interest, or seeking Charity Commission authority. We offer practical, tailored advice to ensure compliance with the revised guidance while protecting your charity’s reputation and integrity. If you would like to discuss how the changes affect your organisation or need support with any aspect of trustee remuneration, please get in touch.
