When an employee becomes a trustee

20th August 2018

When an employee becomes a trustee it is important to consider what the salary is paying them for – either trustee duties or for their contractual employment.

There are only limited circumstances when trustee boards can pay a trustee for carrying out their trustee duties. Whilst there is a general power to pay a trustee for providing one-off or ad-hoc services, there is no such general power to pay a trustee for carrying out trustee duties, and Charities cannot do this unless they have suitable authority. This would come from either the Charity’s governing document, or authority provided by the commission or the court.

If an employee becomes a trustee, their employment usually occurs before their trusteeship and so the salary is not a benefit arising from the trusteeship.

The basic theory is that trustees should not put themselves in a position where their personal interests conflict with their duty to act in the interests of the Charity, unless authorised to do so.

  • Declaring an interest

The employee-trustee may be said to have an economic interest in retaining employment, and with enhancing the terms and conditions of the employment. In order to manage this conflict of interest, the Charity Commission recommends that the employee-trustee declares an interest, and that it is clearly recorded in the minutes and any register of interests that the Charity keeps.

  • Withdrawal from discussion

The employee-trustee should not take part in collective discussion or voting on the contractual terms and conditions of their employment, or in a review of performance relating to it. This also includes any decision on whether it is in the charity’s interests to continue with the post.

For greater transparency, the commission recommends any withdrawals from relevant meetings by the employee-trustee are clearly minuted.

  • Is Charity Commission approval required?

Without express authority, the validity of the employee-trustee arrangement could be susceptible to a legal challenge – either by the commission or by a third party. In practice, it may be very unlikely that an arrangement that is open, transparent and clearly in the interests of the Charity would be challenged. But if trustee boards are in doubt about whether they have a suitable authority, they should contact the Commission for approval in order to reduce the risk of a challenge which, even if unsuccessful, could cause financial and/or reputational damage.

Any authority the Commission gives will be subject to its usual conditions designed to ensure the proper management of the conflict of interest, and that payment is reasonable in relation to the nature of the employment.

Further information about trustee expenses and payments can be found using the following link: https://www.gov.uk/government/publications/trustee-expenses-and-payments-cc11/trustee-expenses-and-payments

Disclaimer - All information in this post was correct at time of writing.
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