Usually when a new charity is formed, the founder volunteers their time and expertise to get things set-up and drive the charitable work forward. As the person with the vision, it is usually about seeing a need met and lives changed, and NOT about the money!
However, even a founder needs to provide for themselves and for their family. And as conscientious trustees, we should want to ensure that our founder is cared for.
So, what are the options? What do we need to think about when we want to pay our founder?
Assuming that they are not also a trustee (that’s a subject for another blog), the first thing to realise is that this area is fraught with potential problems, which, in some cases, may be unlawful. If you are working on a plan to pay your founder, either now or in the future, you will need to take account of the following considerations.
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Can we just employ them and pay what we can afford?
The short answer is no. It doesn’t work like that. Once you take on an employee, you have a legal obligation to ensure that what you pay them covers at least the National Minimum Wage (NMW) for ALL the hours that they work for you in that role (even if you consider some to be voluntary). Failing to do this is likely to result in both financial penalties and reputational damage, as HMRC name and shame organisations that flout the NMW rules. In addition to this, the Charity Commission expects that the salary set should be reasonable for the type of work that your employee is doing, so setting pay at just the NMW may not be appropriate.
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Can we just say that they are self-employed and get them to invoice us?
Again, the short answer is no! Employment status depends on the facts of the situation and, generally speaking, a founder is most likely to be an employee and NOT self-employed. Before making any decision here, you should use the GOV.UK - Check Employment Status for Tax tool to ensure that you have taken on your founder on the right basis.
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So, if they need to be employed, when can we take them on?
The important thing to consider here is that it is not responsible governance to enter into a contract when you cannot afford to meet the resulting legal obligations. In rare circumstances, a grant may be received to cover the founder’s salary in the first couple of years, but more often than not, a new start-up will have very little income to conduct their charitable activities, let alone take on a salary. Building up a steady income stream will often take several years, and trustees will need to be confident that they can afford to employ their founder and pay them for the hours that they work, whether full-time or part-time, before taking them on.
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If they remain a volunteer, can we just give them a ‘thank you’ payment from time to time?
Definitely no. Only specific, documented reimbursement of expenses should be paid to a volunteer. If they receive remuneration for the role, then they risk crossing over from a volunteer to a worker/employee, with all of the legal requirements that come with being a paid worker.
The question of paying a charity founder in the early years is clearly a very challenging task for trustees. So, is there anything that can be done?
What we do see at Stewardship is charity founders raising their own financial support through growing a team of partners in the early years of the ministry, to enable them to live whilst volunteering for the charity. They very often fall in the category of Individual Christian Worker and as such can qualify to open an Individual Partner Account with Stewardship. Our Individual Partnerships Team can support them with resources and training to get them started on their support-raising journey.
What can the trustees do to help? They can spread the word about the mission and work of the charity. If this results in steady income, eventually the charity will be in a position to employ their founder. And once the charity is able to pay the appropriate salary, those who have supported the founder as an individual may well be happy to switch their financial support to the charity.
Contact our Charity Formation team or our Individual Partnerships Team for more information.
Jackie Fletcher
Jackie and her team help churches and charities navigate the minefield of regulations and requirements that affect them. Before joining Stewardship, she was a primary school teacher as well as having involvement in charity administration, finance and governance for a number of different charities. Those experiences help her take complex and broad ideas and make them accessible.
Jackie is passionate about Local Church and Justice, with a particular focus on helping the homeless and victims of domestic violence and trafficking.
