Are paid governors the future?

It is rare, but not unheard of, for charity-owned schools to pay any governors, and the suggestion that a charity may want to pay some or all of their governors who at present act as unpaid charity trustees appears to run contrary to the drive for financial efficiency.

However, schools are telling us that they are finding it difficult to recruit suitably experienced and commercially minded charity trustees, with the role of Chair being particularly difficult to fill. Some schools have turned to recruitment agents and we have seen this be successful, but we are increasingly being asked about whether it is possible for a charity to pay a charity trustee for acting as a governor.

So, can this be done? And how?

Can charitable schools pay their governors?

Charity trustees are traditionally unpaid for their role - the so-called volunteer principle - because a charity should benefit the public and not its trustees whose payments would then cause a conflict of interest. Payments and benefits for trustees are only allowed if permitted by the applicable legal and regulatory context, which includes the school's governing document, charity legislation and the consent of the Charity Commission (or, rarely, the court).

Governors are responsible for the governance of their school under the law and regulation applying to school education, charities, and often companies, to say nothing of the regimes applying to the many areas of their operations - safeguarding, data protection, employees, commercial arrangements and so on. Governors will additionally be feeling the burden of responsibility to make good commercial decisions to steer the school through the current headwinds. It is understandable there can be a desire to pay governors but there are many considerations to deal with.

What do we mean by payments or benefits for governors?

There are several ways in which governors might receive payments or benefits from the school (or more precisely the charity that owns the school):

• Reimbursement of expenses: this is permitted in law without specific allowance being made in the charity's governing document.
• Receiving a benefit from the charity's ordinary work: in the context of a school, this really means the benefit of their child being educated at the school at a discount. Although very common, the general law does not permit this and many old governing documents do not allow this benefit, thus Charity Commission consent should be sought and the governing document amended to permit the benefit.
• Payment for goods or services: a governor with a particular expertise (for example an IT professional), can be paid by the school for the provision of goods or services. A benefit of this kind is generally acceptable now under charity law so long as it is not expressly prohibited by the charity's governing document, there is a clear written agreement and conflicts of interest are well managed.
• Salary as an employee: although not so often seen in independent schools, in the maintained school sector and the wider charity sector this arrangement can certainly be found. If the charity's governing document permits it, this benefit is generally acceptable. Otherwise, amendment and Charity Commission consent will be required.
• Payment for being a governor: unlike payments for specific services or for being an employee, paying someone for their role as a governor (trustee) is not generally permitted, although, with the consent of the Charity Commission, it can be: the Commission will need strong persuasion but there are examples in both our sector and in other parts of the charity sector where paid trustees are permitted.

In all the examples above, the governors would need to manage conflicts of interest, heed regulatory guidance, and undertake a sound decision making process. Additionally, there should never be a majority of governors receiving a benefit from the charity (this position is occasionally found in the wider charity sector but it is rare and unlikely to be appropriate for independent schools).

What does the law allow?

Governors, who are also trustees in the case of a charitable school, can only be paid by or receive benefits from the school in the situations outlined above.

In 2022, changes to charity law added a power for a charity to pay trustees for providing goods and services, separately from being a trustee. Where the power applies, it allows a minority of trustees only to benefit this way, provided conflicts of interest are managed, the payment is not unreasonable and it is in the best interests of the charity. There are still some governing documents which prevent this new power from being used, although changing this is usually uncontroversial.

The idea of paying a governor for their services as a governor/trustee, by way of compensation for lost income from another job or as a payment or stipend for their governor role, is something which would need the Charity Commission's express consent. This is the case whether it is a one-off payment or a permanent change to the charity's powers.

Is there a need?

Some schools can find it hard to recruit for the increasingly specialist role of governor, which places an ever higher demand on individuals for their skills and their time. Some roles, such as chair of governors, or the safeguarding lead, can be even harder to fill given the specialism and demands of those roles.

A board assessment can help to highlight risks and needs which could then help to build a case to demonstrate to the Commission if necessary. A review of the board might include a focus on board diversity, a skills gap analysis, necessary specialisms, the recruitment process and any previous recruitment challenges.

Consideration of payment for governors should involve a collaboration of the board and the senior leadership team. The business and strategic case to support a case for payment of governors will need to identify the recruitment skills needed, what attempts have been or could be made to recruit without an offer of payment, the risk the school faces if it cannot attract appropriately skilled candidates, the cost of the payments, the conflicts of interest that will arise and then to be managed, and any known relevant market intelligence which can provide benchmarking.

A school will need to map out the steps to allow any such payments to take place, including possible changes to the governing document, whether Commission consent is required, and the recruitment process itself. The timescale involved may be one or even two terms.

The risks

Risks may take the form of legal, cultural or financial concerns. We have discussed some of the legal issues above, and a rather obvious risk is that Commission consent to necessary changes may not be granted. Cultural challenges may materialise in the form of a poor recruitment response or even in parental displeasure (given they are, ultimately, the ones who are paying). There is also a risk that non-paid governors will consider a payment to only certain governors unfair. Financial risks arise from having to factor the payments into the budget and sustain them.

Considering risks is a balancing exercise and that is certainly what this decision making calls for. But a well-considered and reasoned decision will rarely be wrong.

So, is paying governors the future? It is certainly one version of it and one we are likely to see feature more than we have done in the past.

For more information or for advice on governor remuneration, please contact Chris Knight on 01923 919 307 or Penelope Straker on 0117 314 5608 in our Charities team, or complete the form below.