Payroll - Paying people perpetually perplexes people...
Some of the common questions we are asked:
- Who needs to be paid?
- What to pay people?
- Where to pay and store records?
- When to pay people?
- Why pay people?
- How to pay people?
- and a few more…
Who needs to be paid?
Charities have volunteers – many trustees and members will be volunteers. But charities also need to pay people.
The fairly straightforward ones are external contractors, shop keepers etc. Those will give you an invoice to pay against, or a receipt that you can file or claim expenses on.
After that things can seem confusing. In this post we’re not going to talk about:
- Employment law (see E),
- Honorariums (see H), or
- Volunteers expenses and contributions (see V coming in November).
We’re focusing on paying employees who work for your charity or organisation.
Since Quaker A-A:E was published in March, Quakers have Britain have released a new Employers Resource (April 2024), which is worth checking out. They’ve updated the information on their website too.
There are laws around paying people, MBS doesn’t give legal advice. So, if in doubt get legal advice, the HMRC has a step by step process and a helpline.
If you’re not certain the person working should be classified as self employed or employed the HMRC have a useful tool.
What to pay people?
People can be paid different rates for different services.
You may have people working in different parts of your organisation, but doing the same job. The job title doesn’t have to be the same it’s the responsibilities and expectations that matter.
You need to ensure they are paid the same and have the same terms and conditions. Even if they’ve been interviewed and are being managed by different groups or branches. If the terms are different that must be explained (e.g. This warden is residential and has 50% of their council tax paid, this warden is not residential and doesn’t have any of their council tax paid).
Where to pay and store records?
It makes sense to have a centralised payroll place. For MBS payroll management clients we require a specific generic email account and cloud based storage so everything is easily found and handed on.
As a minimum – have a generic email address and a dedicated filing system. Payroll is all personal information, that should be protected.
A physical premises might have an office managed by someone who runs the payroll, files everything and stores the records physically and digitally.
Or you can have it all done remote, with cloud based storage.
Either way having a known place for any queries makes things easier for all employees, as well trustees!
This decision is different for each of the clients we work with –
- some have a volunteer calculating the accounts using a variety of options – including ringing the HMRC helpline every month to confirm their figures.
- some have their accountants or bookkeepers providing payroll.
- some have employees with a separate payroll company providing payroll calculations.
- some use their charity accounts packages to calculate the payroll.
Whatever you decide doesn’t have to be long term – which is where the generic email address comes in handy!
If you have outsourced payroll ensure that someone downloads and files the reports and documentation so they are stored safely. Legally you have to keep all such documents for a minimum of six years. Good practice is until the end of that employment and then archive them in case there are any questions.
When to pay people?
- You can pay in advance or in arrears.
- You must state in writing what the system for calculations are, and what the schedule for payments will be.
- Payments must be on time or slightly in advance if the payment date falls at a weekend or public holiday.
- The majority of salary payments will be monthly in arrears.
- You may have additional payment requirements – ad hoc working, flexible hours, etc. again get professional HR/payroll advice – to ensure that you are compliant to the appropriate legislation.
Why pay people?
The reasons for bringing in staff to do work for the charity are many and varied. Outsourcing jobs can save volunteers time and energy, bring in professional skills and knowledge, or separate out a series of tasks or projects from the main work of the charity.
Short term contracts can help evaluate the hours of volunteering done for your organisation too.
How to pay people?
- You can pay in cash – but get a receipt or some form of evidence.
- You can pay by cheque – record when the cheque is cashed.
- You can pay by bank transfer – the transaction record on your statement acts as evidence and can be set on a specific date.
You can separate the setting up of payments, from the calculating and managing of the payroll.
What you decide to do will very much depend on how many employees, and what resources are available within the AM.
A few more questions
Can we pay our trustee for xxxx? Or can we pay our trustee’s xxxx?
Most charities can’t pay their trustees for being trustees. There are rules about how you can pay a trustee or someone in their family for services. See ‘Payments to Charity Trustees‘
Do we have to give payslips?
Yes, payslips are required by law for all employees. Even if the employee offers to sign away that right they’re still required. There are legal standards that have to be met as well.
Do we have to set up a pension scheme – they are expensive?
Pensions are regulated. What you have to do depends on how many employees your charity has, and there are many places to get advice. We recommend talking to your payroll provider and reading the Pensions Regulator guidance.
Do we have to pay sick pay/maternity or paternity leave/other payment? And if so can we make them work?
If the person involved is an employee then they must be paid as per the law. If someone is on sick pay, or parental leave of any type they are not allowed to work – and shouldn’t be asked to volunteer and do the same tasks.
If you’d like a quick chat about managing payroll – click here and set up a free 30 minute meeting.
Wendrie Heywood
MBS Founder
