Your founder has run the charity unpaid for three years. The work has outgrown what anyone can reasonably volunteer; the board agrees she should be paid as coordinator, and everyone is comfortable with the decision because it is obviously right.
There is an answer to this that most boards do not see coming. Where you need Charity Commission authority and the trustee has not resigned, the Commission will usually require them to resign as a trustee. Not as a suggestion. As the normal condition of granting authority.
That reframes the whole conversation, and it is better had before the job is offered than after.
If your board is weighing this and wants someone outside it to think it through, our charity governance support works through exactly these decisions.
Why employing a trustee is treated differently
Being a trustee is generally a voluntary role, and the Commission is aware that outside reaction to paying trustees is often negative. Employment carries risks beyond the ones attached to any trustee payment.
Two are specific to this situation. A paid trustee may become overly influential on the board. And the board may struggle to assess the trustee’s paid work properly, because that person sits in the room where the assessment happens.
The Commission says those risks increase significantly where the trustee being employed is the charity’s founder or chair, or a long-serving trustee; where the paid position is senior, such as chief executive; where the position is permanent; and where the trustee is connected to other trustees, for instance as family members. Its casework has shown that an overly influential trustee makes it hard for trustees to comply with their legal duties.
Read that list against the charity in the opening paragraph. Founder, senior role, permanent, small board. Every risk factor at once, which is why the resignation requirement exists rather than being an arbitrary hurdle.
The rules apply whether the trustee stays or goes, whether the employer is the charity or a company it owns, and whether the person employed is the trustee or someone connected to them. And they apply even where the arrangement plainly benefits the charity. If they are not followed, the person who received the payment, or all the trustees, may have to repay it.
Reimbursing costs a trustee has actually incurred is a different matter entirely; that is trustee expenses, and none of this applies. Paying a trustee to supply goods or services runs on a separate statutory power with its own conditions. A governing document power dealing with goods and services cannot be used to employ a trustee, which is a misreading worth checking for before you rely on a clause.
The trap in resigning first
The obvious move is for the trustee to step down and then apply as an ordinary candidate. It does not necessarily work, and the reason catches out boards who thought they were being careful.
Unless your governing document contains a clear power, you must get Commission authority where the trustee resigned or agreed to resign after you offered them the job. And also where the trustee resigned before the job was offered, but was involved in activities or decisions about it while still a trustee; the decision to create the role, writing the job description, or deciding the pay.
That second limb is the one that bites. A founder who steps down in March and applies in June has usually already sat in the meeting where the post was invented, described and priced. The Commission’s own example is a former trustee who resigned before the job was advertised, took part in the decision to create the role and set its pay, and still needed authority.
The practical consequence is that the sequence matters more than the timing. If a trustee might realistically want the job, they need to be out of the room from the moment the role is first discussed; not out of the charity, out of that conversation. Our guide to running a trustee meeting covers how that gets handled and recorded, and the trustees meeting minutes template gives you the record you will need if the Commission asks.
Who counts as a connected person here
Employment uses a different test from the one that applies to goods and services, and the distinction is worth getting right because it decides whether you need to apply to the Commission at all.
Where your governing document has no suitable power, you need Commission authority if the trustee and the person you want to employ are financially interdependent; partners who share living costs, for instance. If they are not financially interdependent, you do not need authority, provided you manage the conflict of interest.
The Commission’s examples make the line clear. A successful candidate married to a trustee, with joint finances, and no relevant power in the governing document: authority needed. A trustee’s nephew who does not live in the same household: authority not needed, though the conflict still has to be managed. A trustee’s daughter in a separate household, where the governing document’s prohibition refers only to spouses: authority not needed, because the prohibition does not cover the relationship and there is no financial interdependence.
The point buried in those examples is that a prohibition only bites if it covers the actual relationship. Check the wording rather than assuming.
One thing does not vary. A conflict of interest exists either way. A trustee whose son or daughter is employed by the charity is conflicted whether or not they share a household, and so is any other trustee with a relationship to the person employed. Authority is about permission. Conflict is about conduct, and it applies at the first decision and at every later one; whether the role continues, what it pays, how performance is handled.
Recruiting fairly when a trustee is involved
The Commission expects a fair and open recruitment process, and sets out what it should demonstrate. That a trustee has not, directly or indirectly, influenced you to create or keep the job. That the skills and experience sought match the needs of the role rather than a particular person. That the advertising is designed to attract the best candidates, and the assessment is designed to pick the best one.
Two things you must not do: create a job in order to benefit a trustee, and use employment as a way of paying a trustee for carrying out trustee duties. The second is the more common temptation in a small charity, where the founder’s unpaid work and the proposed paid role often look remarkably similar.
A trustee interested in the post, for themselves or for someone connected to them, should not be involved in decisions about the job – how to recruit for it or what it pays – nor in activities such as writing the job description. And no trustee or connected person applying should have an unfair advantage.
Pay has to be reasonable and in the charity’s best interests. For a new role, compare it with similar jobs at similar charities or take specialist advice, and check the charity can afford the package. That belongs in the annual budget rather than being absorbed and worked out afterwards, and the commitment should be visible in what trustees review each quarter.
Some employment decisions at your charity may sit with staff, some with trustees, some with both. This one should sit with the trustees, whatever your scheme of delegation says about hiring generally. And you must comply with employment law alongside charity law, which is a separate body of rules and a separate source of advice.
The hardest part of this decision is that everyone in the room likes the candidate.
Charities led by founders reach this point honestly. The person who built the thing is the person who knows how to run it, and paying them looks like the obvious next step. Whether it is the right one – and what it costs the board in independence – is a question that is difficult to answer from inside. A free clarity call gives you somewhere to test it.
The alternative most boards have not considered
The reverse situation comes up just as often. You have an employee with knowledge the board lacks, and appointing them as a trustee looks like the way to get it into the room.
The Commission names the same risk – an employee-trustee becoming overly influential, rising significantly where they are the chief executive or another senior employee, where the trustee role is the chair, or where they are connected to other trustees. It adds the difficulty of assessing someone’s paid work when they sit on the board assessing it, and the likelihood of public criticism even though the person was an employee first.
Then it offers the route boards rarely think of: if the employee has special knowledge or experience, you could ask them to attend trustee meetings instead of appointing them, without a vote on trustee decisions. That gets the expertise into the discussion, keeps the board independent, needs no authority, and can be reversed. For most small charities it is the better answer, and it is worth putting on the table before the appointment route.
If you do appoint an employee as a trustee, you can do so as long as your governing document does not prohibit trustees being employed or receiving payment or benefit. Where it does, the prohibition has to be removed first, and changing your governing document sets out how.
The conflicts then run permanently rather than once. The Commission’s example is an animal welfare charity that appoints one of its vets as a trustee, where the vet’s parent is also on the board. Every decision touching the vet’s paid position creates a conflict for both of them. On a small board that can leave very few people able to decide, which is the same arithmetic that makes an open trustee vacancy more urgent than it looks.
On future pay, you do not need authority for increases in line with your charity’s established pay and benefits policy. You should get Commission authority where changes fall outside that policy, or where increases, bonuses or other benefits are substantial in the context of your charity. Which is a good reason to have a pay policy before you have a paid trustee.
Before you decide
Check your governing document first, because it determines everything downstream; whether it contains a clear power, a conditional power requiring Commission consent, a prohibition, or nothing at all. Charitable companies have an additional rule: where the contract guarantees, or may guarantee, at least two years’ employment, you need section 201 authority from the Commission and your members’ approval under company law. Get the Commission’s authority first, or make the members’ resolution conditional on it.
Keep a full record of the decision and the reasons for it, and keep any Commission authority alongside it. Disclose the payment in your accounts; accrual accounts under the current SORP, receipts and payments accounts by giving who was paid, why, how much, and the power or authority relied on. Those accounts are public, and the trustee may be named in them.
The risk of an overly influential trustee does not end once the appointment is made, so it belongs on the risk register as a live item with something written against it. Tell incoming trustees about the arrangement during their induction rather than leaving them to find it in the accounts, and be clear that the duties owed by every trustee apply unchanged to one who is also on the payroll.
Charities led by founders eventually face this, and the ones that handle it well start early.
Separating the founder’s role from the board’s, building a board that can function without them, and getting the pay policy and conflicts policy written before they are needed; that work takes months rather than one meeting. Our ongoing support plans are built for it.
