Charity Case: The Problems with the Charity Commission’s Refreshed Guidance on Trustee (Non)-Payments

The Charity Commission (CC) has recently updated its guidance on the payment of charity trustees (CC11), with the stated aim of making it clearer and simpler to navigate the law. The guidance, and the press release accompanying the guidance emphasises the primacy of voluntary trusteeship – reaffirming that trustees should not receive payment for their role, except in specific circumstances.

The guidance is now split into a range of trustee payment scenarios, including:

Paying a trustee to provide goods or services to the charity

Employing a trustee

Paying a trustee for carrying out trustee duties

Compensating a trustee for loss of earnings

Other types of trustee payments

The Charity Commission’s Position on Trustee Payment

In essence, the Commission’s position is as follows:

Charity trustees should not be paid for holding the role of a trustee.

Payment may be allowed if it’s explicitly permitted by the charity’s governing document.

Trustees can be compensated for specific services (such as legal or consultancy work), but this must be carefully managed to avoid conflicts of interest.

Payment must always be in the charity’s best interests, must be properly managed and recorded, and must be transparent to other trustees and supporters.

While this position seeks to preserve trust in the sector and the tradition of voluntary trusteeship, our view is that it in fact reinforces systemic inequalities and exclusion within the charity sector.

Problems with the Commission’s Position on Trustee Payment for Community Organisations

The Commission’s approach to trustee payments fails to consider the very real challenges faced by many in the charity sector, and in particular by grassroots organisations, and community organisations led by-and-for the vulnerable populations they serve, where the inability to pay trustees has become a major barrier to registering or operating effectively as a registered charity.

There has for some time now been discussion and critique that the governance and leadership in charities (i.e. charity boards and sometimes senior management) doesn’t adequately reflect the communities that they are set up to serve. These inequitable governance structures take decision-making power out of the hands of the communities that are most impacted by a charity’s work, and hand that power instead to a board of trustees who are often far removed from the realities experienced by the communities that engage with the charity’s services. As one community leader we spoke with put it:

“Trustees have the last word in the decisions of organisation – but that’s part of a bigger problem as the communities don’t make the decisions.”

The Commission’s restriction on paying trustees exacerbates this sector-wide problem. The expectation that trustees work without financial compensation is only feasible for those who are economically privileged. This maintains existing power structures, with decision-making largely in the hands of those unaffected, or least affected, by the inequities that many charities are trying to address. As another community organiser shared with us:

“I come from an East-End background, my family and friends are all at the same financial level—so trying to have a conversation about unpaid directors for my company has been a difficult conversation.”

In our experience, the rules against paying trustees are a huge barrier for small, grassroots, founder-led organisations. In the grassroots context, many small organisations are set-up, led and staffed entirely by one or two people in the community. When grassroots organisations need funding to continue their work, they are often told to set up as a charity or CIO – however they immediately find that they would either need to give up control of the CIO’s governance by being a paid staff member, or would need to be an unpaid trustee and hand over operational and programmatic control to a different paid staff member. This is a key reason many grassroots organisations are choosing to set up as a CIC or alternative legal structure, then making it more difficult for them to attract funding as a non-charity and exacerbating the exclusion of small, grassroots community organisations from the charity sector.

“I don’t want to give all that work we’ve done away. If I register as a charity I have to continue asking for permission – the board controls the organisation and it’s hard for you to be an employee
and guide the work as a trustee.”

The Victorian Roots of Volunteerism and Its Modern-Day Context

The principle of altruism—the expectation that charity trustees serve voluntarily—has deep roots in Victorian England. During the 19th century, charitable work was seen as a moral duty, particularly among the upper classes. Trusteeship was considered a noble pursuit, and financial compensation was viewed as undermining the altruistic nature of the work. This ethos, shaped by social, religious, and legal norms, was institutionalised with the establishment of the Charity Commission in 1853.

The principle of volunteerism is a beautiful, generous thing and should, we think, continue to be held as a core value in the sector. However, when volunteerism is mandated at the cost of people who should be paid, it stops being beautiful and starts being extractive.

For many black, brown, racially minoritised and migrant communities, there is an increasingly strong emphasis on ensuring that work is not extractive – meaning, that any work undertaken is properly compensated given, in particular, the long and painful history of unpaid and exploited labour within these communities. This emphasis should not be confused for a lack of altruism or voluntary spirit. In fact, many communities of colour have a rich tradition of service, collective responsibility, and mutual aid, often filling the gaps left by the state and mainstream services with minimal or no pay. However, within a historical context where free labour has been systematically exploited, mandating unpaid voluntary work for organisations advocating for racial justice or supporting migrant rights, for instance, strikes a nerve.

These diverse histories and experiences of the communities that are organising within the sector must also inform the Charity Commission’s understanding of the types of work that organisations are engaging in and be reflected better in guidance that doesn’t feel stuck in 19^th century values.

Ethical Considerations: Should Community Leaders Work Unpaid?

More broadly, there is an ethical question of whether community organisers and leaders on charity boards should work unpaid. Trustee roles can be time consuming and come with significant legal responsibility. In the for-profit sector, equivalent work (e.g. as a director) would be compensated, either through directors’ remuneration or a consultancy fee or, in some cases, share options or a recognition of ‘sweat equity.’

While many community organisers choose to work without any financial gain, in our view, it is ethically problematic to essentially mandate that their expertise and labour must be provided without any form of compensation—particularly when the organisations they are helping to build contribute to the public good (rather than to private profit).

Impact on Diversity and Representation in the Charity Sector

The Commission’s guidance states that “sometimes, charities consider paying a trustee for carrying out their trustee duties. This should only be considered in exceptional circumstances and for a temporary period of time when paying a trustee clearly brings a significant advantage to the charity over other options.” The guidance makes clear that paying trustees for carrying out their trustee duties is an exception and not the norm, however the general expectation that trustees will be unpaid has had a clear impact on the quality of trustees that the sector is able to attract.

The Commission’s guidance notes that recruiting the best person for the job is important, yet this contradicts the reality that unpaid trusteeship limits the pool of the best candidates – and in particular, the pool of trustees that have the lived experience of the issues that the charity exists to address. Payment can and should open up trustee roles to people who can’t afford to volunteer their time, including younger people, people from minoritised backgrounds and from economically disadvantaged backgrounds. For instance, in the context of a charity working with low-income groups, it would be absurd not to have any people on low income or benefits in a decision-making role. In the context of a charity working with young people, it would be absurd to have no young people helping to drive the strategy of that organisation.

It is therefore perhaps unsurprising then that charities often tend to be led and governed by people with experience in relatively high-paying and ‘formalised’ professions, including in specialised areas like law, finance, or governance, without adequate involvement from people within the communities that charities serve, who bring the crucial lived experience that charity leaders can and should bring to their roles to operate effectively as trustees for work with their communities.

This issue is reflected in troubling statistics. Research published by the Charity Commission in 2017 showed that boards are around 92% white with an average age of 60. More recent research from Inclusive Boards (2022) shows that the charity sector is faring far worse than the commercial sector in terms of diversity and representation – 29% of charity boards are all white, compared to just 4% of FTSE 100 boards. 51% of charities have no ethnic minority women on their boards. These figures reveal that there is a systemic problem within the charity sector, underscoring the need for better guidance from the Commission – that does a better job of trying to ensure that trusteeship is genuinely representative and is accessible to individuals from all backgrounds.

It’s particularly disappointing to note that the Commission’s previous guidance did, in fact, include a section that acknowledged the importance of diversity in charity governance – recognising that people should not be excluded from trusteeship due to their economic circumstances, and that financial compensation might be justified in cases where trustees would otherwise face hardship. However, this section seems to have been omitted from the refreshed guidance, leaving a noticeable gap in the Commission’s commitment to improving diversity and representation in the charity sector and leaving some ambiguity about whether charities can seek permission for payment based on needing to diversify their boards.

The Commission’s Policy – Failing to Solve the Problems it Creates

The Commission’s refreshed guidance re-emphasises that “Being a trustee is generally a voluntary role. This is what makes the charity sector unique and promotes trust and confidence in charities.”

There are many ways in which the Commission could safeguard the unique and laudable value of volunteerism in the sector, while also making it easier for those charities that wish to pay their trustees with good reason to be able to do so, however the Commission’s guidance fails to adequately engage with any solutions.

A policy that embraces trustee payments where necessary could retain the general expectation of volunteerism, while creating a more permissive space for organisations to structure their governance differently where it would be in the best interests of the organisation. The Commission could have adopted a more solutions-oriented approach by emphasising that any trustee payments should of course come with clarity and transparency about why payments are in the best interests of the charity, addressing issues such as:

why payment is in the public benefit. (e.g. it improves outcomes for the charity’s mission, enables the charity’s potential beneficiaries to have a meaningful say in its governance, and enables the charity to recruit and retain those best qualified to work for its mission, ensuring the charity’s resources are being used to deliver its impact);

why the pay is fair (e.g. that pay is based on benchmarking, not set arbitrarily and is proportionate and fair in context)

whether the pay is transparent (e.g. disclosed through annual reports – Wellcome Trust does this incredibly well)

whether conflicts of interest are being appropriately managed (e.g. following guidelines on trustee conduct conflicts, with the Charity Commission issuing robust guidance on managing conflicts in the case of paid trusteeships)

Finally, the Charity Commission highlights the “risk of public criticism” as a key risk for charities that pay trustees. However, for many organisations, this is a risk of the Commission’s own making – as this risk is exacerbated by the Commission’s own policy that frowns upon trustee payments. The Commission’s apparent lack of trust in charities to make responsible decisions on trustee payments that are in the best interests of their work increases the risk of public criticism for charities that do wish to take this approach and risks reinforcing problematic power dynamics within the sector that benefit the already privileged in taking up positions of power.

The Commission must reconsider its position and allow for greater flexibility in circumstances where paying trustees is in the charity’s best interests. This would not only foster greater diversity within the sector, but would also reflect a more realistic and equitable approach to charity governance. By doing so, the Commission can better support charities that are striving to address the very inequalities that the sector exists to combat.

Note: for further information on the barriers that many grassroots and community organisations are facing with charity status and for fuller context on the quotes used in this article, you can read our publication: Legal Structuring for Social Justice, A Community Legal Toolkit