Last year, new legislation was introduced to enable Parochial Church Councils (“PCCs”) to award contracts of employment and/or payment for services to trustees or connected persons.
Notwithstanding the normal rule that charity trustees may not ‘profit’ from their position, the new rules allow PCCs to appoint a member or a connected person as an employee without having to obtain prior authority from the Charity Commission. This change in the law therefore represents a significant departure from what has for a long time been the standard, default position.
However, any such appointment is subject to the following conditions:
- the trustees should be satisfied that the payment is in the best interests of the charity and that the remuneration paid to the employee is reasonable in relation to the services provided;
- there must be a written agreement between the charity and the trustee or connected person and the agreement must confirm the amount or the maximum amount to be paid;
- the trustee concerned should not make any decisions relating to any aspect of the agreement;
- the trustees must be satisfied that they follow the ‘duty of care’ set out in the Trustee Act 2000, which means that the trustee board must act honestly and in good faith, and must exercise all reasonable care and skill in reaching their decision;
- only a minority of the PCC members can benefit, or be connected with a person who is benefitting; and the charity’s governing documentation must not prohibit payment of a trustee.
We would always recommend that PCCs think carefully before employing a trustee.
The employment contract should be carefully drafted, as this will define the employment relationship going forwards. It is also important to consider what may happen in the event that there is a breakdown in the employment relationship. PCCs must be aware that if they do wish to dismiss an employee, there must be a lawful ground for doing so and an appropriate dismissal procedure should be followed. Notice periods should be carefully considered in a termination situation.
The Charity Commission has published its own guidelines relating to the employment of trustees, which detail when an employment contract can and should be awarded and should serve as a useful starting point. The guidance is available here.