The Lifeline Project was a well-regarded charity. Failure to carry out the targets within the contracts led the charity into insolvency and resulted in a personal, 7-year disqualification order.
We don’t expect any charity sets out with the intention of failing to pay the national minimum wage. However, in our experience many charities do not have sufficiently clear parameters around the way they engage with volunteers and, in some cases, unwittingly create a contractual arrangement with “volunteers” that would make them workers for the purpose of the National Minimum Wage Regulations.
The legal status of an individual, on whether they are truly a volunteer, is not always clear cut and there is no single test to establish whether an individual is a volunteer. However, the following factors will be key in determining whether someone can properly be regarded as a volunteer:
- Payment (of salary or in kind)
In order for any legally-binding contract to exist, there must be some form of benefit passing from one party to the other. This could be a financial benefit or could even include training, where the training is not wholly for the purpose of the persons work as a volunteer.
An obligation on an individual to perform work that is given to them is an essential requirement of any contract.
- Intention to create a legal relationship
If you and the volunteer have no intention to create a legally-binding relationship, a contract cannot exist.
We consider that charities routinely engaging volunteers ought to have a volunteer arrangement (a document that sets out the arrangements between the charity and the volunteer as opposed to an agreement) in place, which helps to define the nature of the engagement between the volunteer and the Charity. A written arrangement will help to identify and separate the rules from those that apply to employees within the charity.
Our clients are increasingly reporting that HRMC visits reviewing minimum wage compliance are considering their arrangements with so-called volunteers and, where there are regular payments going to individuals that appear to be more than expenses based on retained receipts, seeking to challenge the conclusion that they are purely volunteers who are not caught by the National Minimum Wage Legislation.
We therefore consider that if you have volunteers who are regularly paid or provided with benefits you review your arrangements to ensure that you can properly justify the approach.
For more information
If you have concerns about your arrangements with volunteers, please contact Matthew Wort.
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