Meet our Expert
Louise Strom – Associate at Arnold & Porter (UK) LLP
Louise is an Associate at Arnold & Porter (UK) LLP. Her background is in dispute resolution, and she now specialises in regulatory and contentious life science matters. She maintains an active pro bono practice and has advised several charities and NGOs on wide range of legal and strategic matters.
“We would like to be more generous to our long term volunteers. They live in and have food and accommodation provided and get out of pocket travel expenses. Some of them volunteer full time for up to a year. We have considered more generous travel allowances (perhaps to go back home during a stay) and stipends of up to £2000 per year to cover clothes, basic necessities etc. Is this possible or will it make them employees and affect National Minimum wage laws? Secondly, can we pay people for, say, 10 hours per week and then they can volunteer as well for a further 14 hours a week? Thirdly, can we pay for a National Insurance ‘stamp’ for volunteers if they are not employees?”
Why is it important to determine if someone is a volunteer or an employee/worker?
As there is no statutory definition of the term ‘volunteer’, it can sometimes be unclear whether ‘volunteers’ working for charities and not for profits are truly volunteers (offering their services without charge and without obligation), or whether they slip into other categories such as ‘employees’ or ‘workers’. The distinction is however critical because volunteers enjoy very few ‘rights’ as such. They volunteer their services, they may or may not receive reimbursement in respect of their expenses, but essentially they are not paid for their time, they are free to turn down assignments and they can leave when they wish.
On the other hand, if an individual is deemed to be an employee, the volunteering organisation (who is then an employer) becomes liable to pay the individual at least the National Minimum Wage (“NMW”) and to operate PAYE. There are also follow-on implications with respect to the individual’s ability to claim social security benefits and on their income tax liability.
Employees are protected under anti-discrimination laws (such as the Equality Act 2010) in ways that volunteers are not. Employees also enjoy a number of other statutory rights (some of them dependent on their length of service), including protection against unfair dismissal, the right to a statutory redundancy payment, statutory sick pay, statutory maternity leave and pay and other family-friendly rights and statutory minimum holidays. These rights are not extended to volunteers.
Workers are a broader category of personnel, capturing employees in the strict sense, but also individuals working under a contract under which they personally perform work or services for the other party to the contract, in circumstances where that other contracting party is not their customer or client. As volunteers provide their services personally, it is relatively easy for them to slip inadvertently into the worker definition unless care is taken to avoid them being engaged on a legally binding contract and paid beyond the limits set out below. Workers enjoy a number of statutory rights which volunteers in the strict sense do not, including the right to statutory minimum holiday and the right to the NMW.
In the charity sector there is yet a further classification, ‘volunteer workers’, which is addressed in more detail below. Volunteer workers may qualify for reasonable subsistence or accommodation but, like volunteers in the more general sense, are not entitled to the NMW.
It is clearly therefore important that in your dealings with your long term volunteers, you avoid taking steps that would put them into the classification of employee or worker.
Volunteers must not be provided with anything that is not directly linked to their ability to carry out their volunteering duties, because this risks turning the relationship into a contractual one (i.e. an employment or worker relationship) rather than a voluntary one. If volunteers are ‘treated as’ employees or workers then, in the event of a dispute, there is a risk that a court or tribunal will construe the relationship as such. Bear in mind that an employment/worker contract need not be in writing; rather, it can be verbal, or inferred from the circumstances. As a starting point therefore you would want to avoid creating any documentation that suggests that there is any kind of binding legal contract between your organisation and the volunteers. Documents which suggest that volunteers are required to accept work offered to them, or must work for a specific time, or must give notice when they wish to cease their activities, risk creating a contract, which is a pre-requisite for a volunteer to claim employment or worker status.
In light of this, volunteers should not receive any payment, reward or benefit in kind which could suggest that they are being paid for the services they render. This would include payment of holiday or sick pay, or allowances even of a very modest amount. They may be paid money to reimburse their ‘reasonable expenses’. So, what are ‘reasonable expenses’? These are typically limited to:
(a) food and drink consumed while volunteering;
(b) travel undertaken in the course of volunteering, including to/from the place of volunteering;
(c) care of dependants while volunteering;
(d) equipment or protective/special clothing if required for the performance of the volunteer services; and
(e) sundries, e.g. phone calls or postage.
Volunteers may be reimbursed for actual out-of-pocket expenses, but this must not be any more than the exact amount which volunteers have spent in connection with their volunteering. For example, it is not acceptable to give a volunteer travel expenses for commuting to the volunteering centre, in circumstances where he has in fact walked to the volunteering centre. Equally, a volunteer may not be given £10 for lunch when in fact he only spends £7 (and does not reimburse the remainder). The volunteering organisation can have a ‘maximum amount’ policy in place (e.g. maximum of £10 per dinner per volunteer) but it must be the actual amount spent on dinner (or a lesser amount up to the value of the cap), that is reimbursed to the volunteer.
It is possible to pay volunteers in advance for anticipated expenditure. However, the proof (receipts) will need to be provided later on to show that the expense was actually incurred. Any money not spent must be returned. Due to the complications involved it may therefore be safer to reimburse rather than pay up front. Also note that expenses, even if actually incurred, should be reimbursed at a ‘reasonable’ level. Reasonableness is a concept that depends on the circumstances; however it would not, for example, be reasonable for all volunteers to travel First Class each time they took a plane or train ride. It may therefore be advisable for your organisation to impose an upper limit on expenses or issue an expenses policy which guides volunteers as to acceptable levels of expenditure.
Payment of travel allowances to go home, and provision of stipends for clothes and basic necessities, are unlikely to be considered integral to the performance of volunteering duties. These would therefore not constitute ‘expenses’. Rather, they may be regarded as perks which would potentially make the relationship into one of employer and employee/worker. To thank your volunteers, an occasional party or social outing would be acceptable (as this would not constitute consideration for the purpose of establishing an employment or worker relationship). Equally, providing volunteers with gifts after long service is acceptable, so long as the gifts are small in value (e.g. chocolate, flowers) and ‘one-offs’ rather than an expectation.
Subsidence allowances and provision of accommodation
Rules on expenses are tricky and, to complicate matters further, the granting of subsidence or accommodation has special implications for the purpose of NMW laws. This is because there is a further category of individuals to consider alongside those of ‘employees’ and ‘volunteers’, namely that of ‘voluntary workers’. A voluntary worker is an individual who works for charities, voluntary organisations, associated fund-raising bodies and statutory bodies. Voluntary workers are exempt from NMW laws so long as they:
(a) receive no payment other than reimbursement of expenses (this is the same condition as for volunteers); and
(b) receive no benefit in kind other than reasonable subsidence or accommodation.
For the NMW exemption to apply, any accommodation provided under (b) must be reasonable in nature; it is also not acceptable to provide money in lieu of accommodation (i.e. money intended for the voluntary worker to put towards his or her accommodation).
Subsidence generally includes food and drink, laundry, basic toiletries, medicine and utilities. For the NMW exemption to apply under (b), the subsidence cannot take the form of a monetary payment if a voluntary worker is engaged directly by a charity or voluntary organisation (or similar body). However, if a voluntary worker is engaged as a result of tri-partite arrangements between a charity and another charity, voluntary organisation or similar entity, it is acceptable for the subsidence to take the form of monetary payment(s).
Live-in volunteers who have food and out-of-pocket travel costs provided to them by a volunteering organisation are likely to fall within the category of voluntary workers. So long as (i) their accommodation is provided directly by your organisation (and they are not, for example, given money to pay for rent elsewhere) and (ii) you provide reasonable subsidence in the form of actual goods and services (rather than money in lieu of these), the NMW exemption should apply and they should not be entitled to the NMW. Provision of a monetary stipend and payment of travel costs that are not integral to the volunteering duties would risk bringing the voluntary worker outside the scope of the NMW exemption, thereby rendering you liable to pay them the NMW (unless the stipend and travel costs were provided in the context of a tri-partite agreement).
Mix and match: paying individuals for some of their time and asking them to volunteer for additional time
In theory, there is nothing to prevent individuals from combining part-time volunteering with part-time employment, even where this is with the same organisation. However, unless there is a significant demarcation between the two roles (e.g. regarding compensation and nature of responsibilities) there is a real risk that the volunteering role may be construed as an employment, or at least a worker relationship. It will be necessary for your organisation to decide if it thinks it can implement that demarcation in practice, but you should expect it to come under some significant scrutiny by the authorities which may be sceptical of the arrangement. The Department for Work and Pensions has made clear that choosing not to be paid is not the same as volunteering. If an individual performs largely the same role, but some of it is paid and some of it is not, then the alleged ‘volunteering’ element of the relationship risks being classified as ‘unpaid work’. If so, the NMW law will apply to the unpaid portion of work, just as it does to the paid portion.
Paying for National Insurance ‘stamps’ for volunteers (who are not employees)
HMRC has confirmed that, in principle, Class 2 National Insurance contributions may be paid by a volunteering organisation in respect of volunteers who are ordinarily resident in the UK (telephone call on 12 November 2015).
Useful telephone numbers
HMRC Charities helpline: 0845 302 0203
HMRC National Insurance helpline: 0300 200 3503
National Centre for Volunteering Information Service: 020 7529 8900