Board Payment Wizard

In that case, there are no legal obstacles to director payments, and your organisation is free to decide what will serve it best.

If  you’re in any doubt at all about legal obstacles, there are at least three pieces of regulation you need to refer to here.

First, check your constitution. If it specifically rules out payments to directors, that’s that. Your only avenue if you want to change the situation to change the constitution, which requires a vote by the members.

If you’re a charity or not-for-profit regulated by the Australian Charities and Not-for-profits Commission’s Governance Standards, then, broadly speaking, you are allowed to pay your directors (if your constitution allows it), providing you don’t make payments that are unreasonable, unauthorised or unjustifiable.

If you’re an Indigenous Corporation governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the CATSI Act), you should be aware of Section 252.1 (1) of the Act, which states: "Unless the constitution of an Aboriginal and Torres Strait Islander corporation provides otherwise, the directors of the corporation are not to be paid remuneration." For such a corporation to permit the payment of directors, it must pass a resolution in a general meeting.

Further reading

Remunerating Charity Board Members (published by the ACNC)

There is no regulatory body that disallows payments to directors, so if you’re so certain, it must be that your constitution disallows them, right? In that case, your only avenue if you want to change the situation to change the constitution, which requires a vote by the members.

If you’re a charity or not-for-profit regulated by the Australian Charities and Not-for-profits Commission’s Governance Standards, then, broadly speaking, you are allowed to pay your directors (if your constitution allows it), providing you don’t make payments that are unreasonable, unauthorised or unjustifiable.

If you’re an Indigenous Corporation governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the CATSI Act), you should be aware of Section 252.1 (1) of the Act, which states: "Unless the constitution of an Aboriginal and Torres Strait Islander corporation provides otherwise, the directors of the corporation are not to be paid remuneration." For such a corporation to permit the payment of directors, it must pass a resolution in a general meeting.

Further reading

Remunerating Charity Board Members (published by the ACNC)

There are at least three pieces of regulation you need to refer to here.

First, check your constitution. If it specifically rules out payments to directors, that’s that. Your only avenue if you want to change the situation to change the constitution, which requires a vote by the members. In Victoria, the model rules make no mention of director payments. In NSW, the model constitution says an organisation “must not conduct its affairs so as to provide a pecuniary gain for any of its members”, but the Act specifies that this doesn’t include remuneration.

If you’re a charity or not-for-profit regulated by the Australian Charities and Not-for-profits Commission’s Governance Standards, then, broadly speaking, you are allowed to pay your directors (if your constitution allows it), providing you don’t make payments that are unreasonable, unauthorised or unjustifiable.

If you’re an Indigenous Corporation governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the CATSI Act), you should be aware of Section 252.1 (1) of the Act, which states: "Unless the constitution of an Aboriginal and Torres Strait Islander corporation provides otherwise, the directors of the corporation are not to be paid remuneration." For such a corporation to permit the payment of directors, it must pass a resolution in a general meeting.

Further reading

Remunerating Charity Board Members (published by the ACNC)

Congratulations on being in a strong financial position. If you have the capacity to pay, then you have options, which is great. But by itself, being able to afford to pay isn’t a good reason to pay your directors. Before you start writing cheques, work through the questions that follow, which will help you to consider the non-financial implications of your director payment policy.

It sounds as though your organisation is operating with thin margins, and this can be very limiting. Before you even consider paying your board directors, is your financial position strong enough that you are able to fulfil your mission, or at least make steady progress towards it? If you are, that’s great. Paying your board directors doesn’t necessarily need to be a high priority for your organisation. Do make sure, though, that your board members regularly show their appreciation for the work that each other does in other, non-financial ways. Being a board member is bloody hard work.

If you have serious doubts about whether your organisation is fulfilling its mission – whether for financial reasons or not – then, quite frankly, paying your board directors probably wouldn’t help anyway. What’s holding you back? Is it simply lack of money? Or is it governance problems, staffing issues, a board that’s lost its way, or something else? All these problems have solutions, but for now, the question of paying directors is not your highest priority.

Further reading

Fundraising fundamentals

Developing a fundraising strategy

Damn Good Advice for Board Members

If you haven’t said an outright “no”, then it sounds as though you’ve got options. That’s a good position to be in. But you might need to make some sacrifices in other areas if you want to pay your directors, or put extra time, energy and other resources into your fundraising activities. It’s all food for thought as you work through the questions that follow.

Further reading

Developing a fundraising strategy

According to survey data gathered by Our Community in 2021, only 1% of organisations in your size category pay their board directors. And 54% in this category are opposed to paying board members. This suggests that almost half of all very small organisations might like to pay their board members but don’t, because they can’t afford to or for some other reason. You don’t need to worry about competing with other organisations for board members in a financial sense. However, there are other reasons why you might consider paying your board members, and we’ll look at those next.

According to survey data gathered by Our Community in 2021, only 1% of organisations in your size category pay their board directors. And 50% in this category are opposed to paying board members. This suggests that half of all small organisations might like to pay their board members but don’t, because they can’t afford to or for some other reason.

According to survey data gathered by Our Community in 2021, only 3% of organisations in your size category pay their board directors. And 52% in this category are opposed to paying board members. This suggests that almost half of all medium organisations might like to pay their board members but don’t, because they can’t afford to or for some other reason.

According to survey data gathered by Our Community in 2021, only 7% of organisations in your size category pay their board directors. And 40% in this category are opposed to paying board members. This suggests that over half of all large organisations might like to pay their board members but don’t, because they can’t afford to or for some other reason.

According to survey data gathered by Our Community in 2021, only 15% of organisations in your size category pay their board directors. And 25% in this category are opposed to paying board members. This suggests that most large organisations might like to pay their board members but don’t, because they can’t afford to or for some other reason.

It’s tough, isn’t it? It’s likely that paying your board directors would help to attract new people to your board, and this is one good reason why you might consider providing payment.

However, it’s not that simple.

Not everybody is motivated by money. Some people have enough money to get by, and would rather have more time. Why do you struggle to recruit and retain directors? Does your group have a fine reputation, or is it riven by factionalism and plagued by disorganisation? Is it known for its good work, or does it putter along without making much of a difference? Are you based in a small town where everybody is busy because they’re on three committees plus the fire service and the SES?

There are some problems that money can’t solve.

Further reading

Damn Good Advice for Board Members

Revitalise Your Community Board: A makeover for community groups that want to lift their game

It’s likely that paying your board directors would help to attract new people to your board, and this is one good reason why you might consider providing payment.

However, it’s not that simple.

Not everybody is motivated by money. Some people have enough money to get by, and would rather have more time. Have you considered why you struggle to recruit and retain directors? Does your group have a fine reputation, or is it riven by factionalism and plagued by disorganisation? Is it known for its good work, or does it putter along without making much of a difference? Or are you based in a small town where everybody is busy because they’re on three committees plus the fire brigade and the SES?

There are some problems that money can’t solve.

Further reading

Damn Good Advice for Board Members

Revitalise Your Community Board: A makeover for community groups that want to lift their game

Fantastic! Many organisations would envy your position.

If you’ve already got a solid board of enthusiastic members, plus a pipeline of new talent coming through, then there’s no need to pay your board directors in order to attract new people to the organisation.

But reflect for a moment on the composition of your board. Is it diverse in terms of gender, age, socio-economic status and skills? Is it made up mainly of people who’ve reached a point in their careers where they have time and money to spare? That’s not necessarily a problem; it depends on your mission, your sector, your location and so on. But ask yourself these very specific questions: is the board lacking in representation from any groups who would be unable to afford the time to contribute to a board unless they were paid? And would money alone be enough to bring them in?

Further reading

Board diversity help sheets

Great. Having consumer voices at the board table is invaluable. Make sure you specifically seek out their views on the question of paying board members – or perhaps you are one of those voices.

Do you feel that the impact of being paid or unpaid as a board member is any different for you than for others on the board? What policies would make it easier for you to maintain your ongoing contribution to the board? What would attract other consumers? Reimbursement of expenses? An honorarium? No change?

Further reading

Board accountability

Interesting. Why is that? Having consumer perspectives at the board table is invaluable – you know, “Nothing about us without us.” Have you tried to attract consumers and found that you couldn’t? If that’s the case, then it could be well worth introducing a board member payment policy. If you haven’t tried, then a payment policy might be only one tool in your toolbox. Do you involve consumers in your strategy-making and decision-making in other ways?

Further reading

Board accountability

An organisation’s choice to pay board directors has different financial effects on different people. For some people, any payment is insignificant. They don’t need the money, and they would probably want to join the board whether or not the position was paid. For others, the payment is very significant. It can be used to pay for rent, bills, groceries, childcare and other essential items. And there’s a whole range of varying levels of financial need in between, and a whole range of different motivations for joining a board. If you feel strongly that there is a danger of attracting “the wrong type of people” to your board by offering payment, have a think about what people you might be missing out on by not offering payment.

Further reading

Board diversity help sheets

Advertise a board vacancy

6. Which of the following eight statements closely reflects your beliefs about paying board members? You may choose more than one. All these statements come from real-life responses to Our Community’s 2021 survey on paying board directors.

An organisation’s choice to pay board directors has different financial effects on different people. For some people, any payment is insignificant. They don’t really need the money, and they would probably want to join the board whether or not the position was paid. For others, the payment is very significant. It can be used to pay for rent, bills, groceries, childcare and other essential items. And there’s a whole range of varying levels of financial need in between, and a whole range of different motivations for joining a board. Paying board members is one way of gaining access to people’s time and attention, but it’s not the only way. Also, it’s no guarantee of access.

Further reading

Board succession part 1

Board succession part 2

Board succession part 3

Advertise a board vacancy

An organisation’s choice to pay board directors has different financial effects on different people. For some people, any payment is insignificant. They don’t need the money, and they would probably want to join the board whether or not the position was paid. For others, the payment is very significant. It can be used to pay for rent, bills, groceries, childcare and other essential items. And there’s a whole range of varying levels of financial need in between, and a whole range of different motivations for joining a board. If you feel strongly that there is a danger of attracting “the wrong type of people” to your board by offering payment, have a think about what people you might be missing out on by not offering payment.

Further reading

Board diversity help sheets

Advertise a board vacancy

Paying board members is one way of attracting and retaining talented people, but it’s not the only way. Also, depending on the sector in which your organisation operates, you might find that the amount you can afford to pay isn’t enough anyway. And there’s another twist: if you do choose to pay your board members, is competition for talent really the most compelling reason for doing so? What about equity and board diversity? But let’s go back to the competition question. Don’t ask what candidates can offer to your organisation; ask what your organisation can offer to candidates. Some of the most successful board recruitment stems from long-term relationship building, reputation building, and mission success. Focus on those and you might find that payment is just the cherry on the top.

Further reading

Board diversity help

Board succession part 1

Board succession part 2

Board succession part 3

Advertise a board vacancy

Your principled position is admirable. And you’re right to point out that many grants don’t cover overhead costs such as rent, staff salaries, insurance, stationery, and payments to board directors, even though most or all of these are essential to the very existence of the organisation. (There are exceptions, though, so do check with your funder if you’re unsure about how you’re allowed to use the funds.)

However, if grants are your organisation’s only source of income, then you’re taking a huge risk. Diversifying into donations, crowdfunding, membership income, events, sales or sponsorship – preferably all of the above – would help to ensure your long-term viability and provide you with more autonomy, including a choice about whether you pay your board directors.

Further reading

Fundraising fundamentals

Developing a fundraising strategy

Yeah, who’d be a director, right? It’s the path to sleepless nights and board meeting headaches. Fortunately, there are generous, committed, determined people around who still want to give up their time to help make the world a better, kinder place. Paying board members is one way of attracting those people to your organisation, but it’s not the only way. And there’s another twist: if you do choose to pay your board members, is attracting people with specific expensive skills really the most compelling reason for doing so? What about equity and board diversity? But let’s go back to question of attracting people who have skills specific to your sector. Don’t ask what candidates can offer to your organisation; ask what your organisation can offer to candidates. Some of the most successful board recruitment stems from long-term relationship building, reputation building, and mission success. Focus on those and you might find that payment is just the cherry on the top.

Further reading

Board succession part 1

Board succession part 2

Board succession part 3

Advertise a board vacancy

Altruism is an admirable quality, and humanity wouldn’t survive without it. We agree on that. Where we disagree is on dividing people into two mutually exclusive categories: (1) people who really want to work for a community organisation; and (2) people who need to make money.  Can’t people fall into both categories?

An organisation’s choice to pay board directors has different financial effects on different people. For some people, any payment is insignificant. They don’t need the money, and they would probably want to join the board whether or not the position was paid. For others, the payment is very significant. It can be used to pay for rent, bills, groceries, childcare and other essential items. And there’s a whole range of varying levels of financial need in between, and a whole range of different motivations for joining a board.

Imagine a group of people with amazing life experiences, diverse skills and strong commitments to causes who also happen to be scraping by on low wages or inadequate government benefits, or on no wage at all because they’re looking after kids full-time. They’re out there, and your board is missing out on their contribution.

Further reading 

Board diversity help

You evoke a wonderful community where everybody looks after everybody else. Love it!

What kinds of people make up your community? Does it include people who are doing it really tough, just scraping by on low wages or government benefits? Of course it does. Does your “community built, community run” organisation include them? Does it include them on the board of directors?

An organisation’s choice to pay board directors has different financial effects on different people. For some people, any payment is insignificant. They don’t need the money, and they would probably want to join the board whether or not the position was paid. For others, the payment is very significant. It can be used to pay for rent, bills, groceries, childcare and other essential items. And there’s a whole range of varying levels of financial need in between, and a whole range of different motivations for joining a board.

Imagine a group of a people with amazing life experiences, diverse skills and strong commitments to causes who also happen to be scraping by on low wages or inadequate government benefits, or on no wage at all because they’re looking after kids full-time. They’re out there. Check whether your board is missing out on their contribution.

Board diversity help

That’s an excellent question, and there are strong arguments both ways but no clear answers. Only your organisation can decide what is right for you.

The main reason is market value. Board directors tend to bring specialist skills and experience to the board, whereas volunteers tend to occupy less skilled roles. (There are many, many exceptions, of course, but you get the gist.) The specialist skills are harder to get without offering payment.

The main reason not to pay board directors without also paying volunteers is fairness. Board directors and general volunteers all donate their time. It’s not fair to pay some and not others, the argument goes. Everyone’s time is valuable.

A related argument is the history argument. Not-for-profits are historically run by volunteer boards. This is a valuable legacy that shouldn’t be altered, some say.

Then there’s the related “money for the mission” argument (the overhead myth), which goes that paying directors (or directors and volunteers) uses money that should be put towards the organisation’s mission. Let’s rebuff that argument. The overhead myth has been roundly refuted. The proportion of an organisation’s revenue that is spent on overhead (including remuneration) tells you nothing about the organisation’s effectiveness. Paying board members just might bring in new people who have the ability to transform the organisation’s effectiveness.

Further reading

Valuing our volunteers

Busting the overhead myth

Don’t you wish there was a magic bullet that would solve this problem? It’s tempting to think that if you pay your board directors, all your existing board-related woes will disappear overnight. Suddenly everyone will read the board papers a week before the meeting, attendance at meetings will shoot up to 100%, and directors will throw themselves into fundraising like never before.

Sorry, it’s not going to happen. Paying your existing board directors is unlikely to increase the quality of their performance. Building a culture where most people do what’s expected of them most of the time without being reminded takes careful recruitment, sound induction, well-worn policies and procedures, and carrots and sticks. Carrots alone won’t cut it.

However, payment does tend to be effective in increasing the size of the pool of suitable applicants for new board positions.

Where did you find your directors? Hold on to them – their blood’s worth bottling! Do you pay them? If you do, what effect do you think it has on performance?

Further reading

Reducing the chances of board burnout

Dealing with difficult board members

Well done. If you’re only having this problem half the time, you’re ahead of some organisations. But it’s still frustrating, right? It’s tempting to think that if you pay your board directors, all your existing board-related problems will disappear overnight. Suddenly everyone will read the board papers a week before the meeting, attendance at meetings will shoot up to 100%, and directors will throw themselves into fundraising like never before.

Sorry, it’s not going to happen. Paying your existing board directors is unlikely to increase the quality of their performance. Building a culture where most people do what’s expected of them most of the time without being reminded takes careful recruitment, sound induction, well-worn policies and procedures, and carrots and sticks. Carrots alone won’t cut it. But it sounds as though you’re part of the way there.

However, payment does tend to be effective in increasing the size of the pool of suitable applicants for new board positions.

It’s good that you’re aware of what it costs your board directors to be on the board. How evenly are those costs distributed? Do you have one or two directors who incur all of those costs, while the rest spend little or nothing? Do women bear more of the costs than men? Do people in the outer suburbs or outlying districts pay more than those who live within walking distance of your meeting venue? Do you have board directors who need to arrange wheelchair-accessible transport? Even if your board decides against paying directors a fee, we recommend that you consider a policy on reimbursing expenses or paying a stipend for expenses. It’s only fair.

Further reading

Understanding travel expenses

Reimbursement policy template

That’s interesting. Are you sure? Would a survey – perhaps an anonymous survey – confirm this? If you’re right, then this might be a symptom of a lack of diversity on your board. Do you have parents with kids at home on your board, or is everybody of retirement age? Do you have wide geographic coverage among board members, or is everyone from a small area? (These narrower characteristics might be appropriate if your organisation is the Brookwood Retirees Advocacy Group or the Annandale Senior Citizens Association or something like that.) Anyway, the point is that on most boards, most people will incur some expenses in attending meetings and making a contribution, and some people will incur more expenses than others. Even if your board decides against paying directors a fee, we recommend that you consider a policy on reimbursing expenses or paying a stipend for expenses. It’s only fair.

Further reading

Understanding travel expenses

Reimbursement policy template

Cost might be an obstacle that’s stopping good people from joining your board, but the good news is that it’s a fairly easy obstacle to remove. First you need to be aware of it, and then you need to come up with a policy that mitigates it. Even if your board decides against paying directors a fee, at a minimum we recommend that you consider a policy on reimbursing expenses or paying a stipend for expenses. It’s only fair. The alternative? Locking out single parents who need to pay babysitters, or older people who can’t drive and need to take taxis, or people with disability who have special access needs.

Further reading

Understanding travel expenses

Reimbursement policy template

With this sort of time commitment, you’re likely to be an extra-small organisation, probably run by volunteers with no paid staff members. Organisations like yours are the least likely to be able to afford to pay board directors. And you might feel that it would be inappropriate to pay board directors anyway, because nobody else in the organisation is paid. (We base these comments on the findings of our 2021 survey about paying board members.)  And yet without the help of paid staff, your board directors probably carry a disproportionately heavy load.

The only reason we’ve asked this question is that we want you to think about how much you ask of your board members, and what they’re worth to the organisation. Putting it in terms of hours and dollars is crude but handy. What currency are you using to pay your board directors? Relationships? Thank yous? Mutual support? The satisfaction that comes from achieving the mission? Make sure you keep on minting it.

Further reading

Valuing our volunteers

Reducing the chances of board burnout

With this sort of time commitment, you’re likely to be a small to medium organisation with some paid staff members to help do some of the grunt work, or a large or extra large organisation with many paid staff members.

The only reason we’ve asked this question is that we want you to think about how much you ask of your board members, and what they’re worth to the organisation. Putting it in terms of hours and dollars is crude but handy. What is their time worth, by the hour? What currency are you using to pay your board directors? Relationships? Thank yous? Mutual support? The satisfaction that comes from achieving the mission? If you decide to add dollars to the mix, make sure you keep on minting those other currencies as well.

Further reading

Valuing our volunteers

Reducing the chances of board burnout

That’s a lot of hours. The only reason we’ve asked this question is that we want you to think about how much you ask of your board members, and what they’re worth to the organisation. Putting it in terms of hours and dollars is crude but handy. What is their time worth, by the hour? What currency are you using to pay your board directors? Relationships? Thank yous? Mutual support? The satisfaction that comes from achieving the mission? If you decide to add dollars to the mix, make sure you keep on minting those other currencies as well.

Further reading

Valuing our volunteers

Reducing the chances of board burnout

Historically, charity and not-for-profit boards have worked for the good of the cause, with no expectation of payment. The world has changed – people work longer hours and have less time to contribute, the retirement age has increased, and everyone seems to be busy – but this view of the way boards should operate persists, even as volunteer numbers fall to perilously low levels.

Dealing with public perceptions is likely to be the biggest challenge your organisation will face if it decides to pay board directors. To bring people along with you, you’ll need to focus on consultation, communication and transparency. It will take time.

Historically, charity and not-for-profit boards have worked for the good of the cause, with no expectation of payment. The world has changed – people work longer hours and have less time to contribute, the retirement age has increased, and everyone seems to be busy – but this view of the way boards should operate persists, even as volunteer numbers fall to perilously low levels.

If your organisation decides to pay its directors, it’s important that you first have clear support from the majority of your stakeholders. To bring people along with you, you’ll need to focus on consultation, communication and transparency. It will take time.

Historically, charity and not-for-profit boards have worked for the good of the cause, with no expectation of payment. It sounds as though your stakeholders understand that the world has changed – people work longer hours and have less time to contribute, the retirement age has increased, and volunteer numbers have fallen to perilously low levels. You have an opportunity to translate that into good policy. Focus on consultation, communication and transparency in coming up with a board director remuneration policy that helps the organisation to remain sustainable and draws good people into the fold.

Further reading

Become a more accountable, transparent and consultative board

ICDA code of ethics

CEO remuneration This help sheet is about setting the salary of the CEO, not the board members, but it outlines some useful principles.

Making a special announcement may give this matter more importance than it justifies, and may stir up arguments that could have been avoided, but it does run the risk that it’ll then be pulled out by malcontents or rivals and made much of.  If you announce it yourself you can put your best spin on it and tell people why you think it’s necessary.
Not talking about it, too, may diminish its power to attract new nominations.

Further reading

Become a more accountable, transparent and consultative board

ICDA code of ethics

In general, it’s a good idea for the governance of the organisation to be as transparent as is compatible with commercial considerations. Being up front with members and donors shows that you’re confident of the merit of your proposals and want them to be widely known.

Further reading

Become a more accountable, transparent and consultative board

ICDA code of ethics

CEO remuneration This help sheet is about setting the salary of the CEO, not the board members, but it outlines some useful principles.