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Factsheet 8 - Volunteer Expenses and Rewards Q&A

Welcome to Managing Volunteers - The essentials. VCTH produces factsheets on some important issues that organisations face when working with volunteers. Get in touch if you need further information on any of the subjects covered in the factsheets and don't forget about our 1-2-1 support available on anything regarding managing and working with volunteers.

This factsheet covers Volunteer Expenses and Rewards. The fact that volunteers are unpaid for their work doesn't mean that they should be out of pocket after giving their time. The reimbursement of expenses should be a straightforward matter, but there are a number of legal or good practice  issues to be aware of. Click on any of the questions below and the link will take you to the answer.


 

Why should we reimburse volunteer expenses?

Reimbursing volunteers' expenses is an equal opportunities issue. The cost of travelling and a meal eaten out is significant to someone on benefits or a low income.  Any organisation serious about involving a diverse range of volunteers should reimburse expenses. Volunteers are making a gift of their time - one that has substantial monetary value. They should not be expected to spend money as well. Many people would not be able to volunteer without receiving their expenses. Volunteering should not be the preserve of the well off. Unemployed people, students, older people, asylum seekers and the low waged are all likely to be living on a low income, and the cost of public transport and/or meals out may well be considerable for them.  
 
We recommend that you have a Volunteer Expenses Policy, or include a section on expenses within your broader Volunteer Policy.
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What if we can’t afford to reimburse volunteer expenses?

We recognise that some organisations, especially those that have no funding, simply cannot currently afford to reimburse volunteer expenses. However we urge them to keep reimbursement as an aspiration, and to reflect volunteer costs in any future funding bids.  Also organisations could consider reimbursing only some limited expenses, e.g. travel, as a way of keeping costs down.  
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What expenses should we reimburse?

In general any reasonable expense incurred as part of the voluntary work should be reimbursed. This can include:
  • travel to and from the place of volunteering;
  • travel while volunteering;
  • meals taken while volunteering;
  • care of dependants, including children, during volunteering;
  • postage, phone calls, stationery;
  • cost of protective clothing/special equipment, etc.
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Can volunteers claim for telephone charges and internet usage if they have a pay-monthly telephone/internet plan?

Yes, but only if it can be clearly shown that there has been an additional expense to the volunteer. If they already have a telephone calling plan and use some of the included minutes in the course of their volunteering, but don’t exceed those minutes, there clearly is no additional expense. 

The volunteer would need to provide an itemised bill that shows that it was the calls related to the volunteering that took them over their included minutes.
The same principle applies to internet usage. If a volunteer has to buy an internet connection (e.g. a broadband line or a pay as you go dongle) to carry out their role, that’s clearly an expense and can be reimbursed. However, if they already have a connection and don’t have to pay any additional costs, there is nothing to reimburse.
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Should we limit what volunteers can claim?

It's fine to put sensible limits on some expenses to prevent the unlikely occurrence of a volunteer ordering an expensive meal for lunch then presenting you with the receipt. But be sure to set your limit at a level that allows volunteers to have a hot meal and non-alcoholic drink in local cafes.  

It is also reasonable to ask volunteers to come in by the cheapest reasonable form of public transport. But remember that it may be necessary for some volunteers to take taxis, for example because of disability or to stay safe at night, so try to be flexible and budget for extra costs.  It is reasonable to expect volunteers to tell you in advance about any additional costs so that you can decide whether your budget can cover it.
 
In all cases, it’s important to ensure volunteers are aware of the rules about expenses so that they don’t incur unnecessary costs.
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Why should we avoid paying a flat rate to volunteers?

It's extremely important to reimburse actual out-of-pocket expenses only. This means the volunteer needs to keep receipts, bus tickets, etc. Some organisations consider paying a flat rate - e.g. £6 a day to cover food and travel. While this might be simpler to administer, we strongly advise against this. It can cause significant problems for both the organisation and its volunteers. Because any money received over the expenses actually incurred is considered as income, it can cause problems for volunteers in terms of tax and welfare benefits. The additional sum may also be regarded as a payment in return for work (wages), inadvertently creating a contract with volunteers that gives them some or all employment rights (more information below). If the flat rate you pay is less than minimum wage your organisation is breaking the law and risks prosecution.
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How should volunteers claim?

Provide a simple claim form for volunteers to fill in and attach their receipts/tickets.

If your organisation can only process expenses claimed within a certain timeframe after they are incurred, eg within one month, you should ensure that volunteers know this so they do not miss the deadline.
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How should expenses be reimbursed - cash or cheque?

Cash is much better for volunteers than a cheque. Some people do not have bank accounts, and cheques take time to clear. 
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How often should we reimburse volunteers' expenses claims?

If possible, try to reimburse expenses on the same day in cash. Some organisations only reimburse expenses on a weekly or monthly basis. This might be easier for the organisation to manage, but it can be very difficult for people on low incomes to wait that long to be reimbursed. Do not assume that a small amount of money for you is a small amount of money for everyone else. In particular, asylum seekers in receipt of vouchers have very little access to cash, so may find it difficult to pay for travel or go out and buy a sandwich. Ask your volunteers what suits them best. In some cases it may be more efficient to develop different systems for different people.
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Can we reimburse expenses in advance?

It is now permissible to reimburse expenses in advance for volunteers on benefits under the Social Security Amendment (Volunteers) Regulations 2001. The reason this was introduced was to recognise that, for a person on benefits, it can be hard to come up with the money for travel, food or childcare, etc. even if it is reimbursed later. Note that this is still reimbursement. Any unspent money should be returned, and evidence of the expenses (receipts) should still be collected.
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What about season tickets and Oystercards?

Volunteers should only be provided with season tickets if the cost is less than it would be over the same time period if they bought individual single or return tickets.
 
If a volunteer uses an Oystercard, there are a variety of ways they can offer proof of travel. They can:
  • go to a London Underground station ticket office and top up their card for the exact cost of a single/several singles. This doesn't prove that a journey was made, so some organisations might prefer it if a volunteer's top-up receipt is dated for the day of their volunteering
  • present their Oystercard at a London Underground station ticket office and receive a statement. The statement lists the travel card purchases, pre-pay top-ups and pre-pay balance on a card. It also includes an Oyster usage statement which shows the date, time and travel details for the last eight journeys
  • request a full Oystercard statement by calling the Transport for London helpline on 0845 330 9876. A statement can then be posted which lists the past eight weeks' journey history
  • print out their Oystercard Journey History statement by using the Transport for London website. The volunteer must register their Oystercard in order to do this.  The statement gives details of journeys made in the past eight weeks. Details of how to do this are given in the Oyster Help section.  The volunteer can also register to have Oyster journey statements emailed to them at the end of each month
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What about reimbursing volunteers’ driving and cycling expenses?

HM Revenue and Customs (formerly the Inland Revenue) sets a rate for the reimbursement of driving expenses. These are set at a level to take into account depreciation of the vehicle and other running costs as well as fuel.  HMRC approved mileage rates from 2011-2012 onwards are:
  • cars and vans - 45p per mile for the first 10,000 miles, 25p per mile over 10,000 miles
  • motorcycles - 24p per mile
  • bicycles - 20p per mile
For more information go to: http://www.hmrc.gov.uk/rates/travel.htm

Reimbursing expenses above these rates is likely to affect the tax status of the volunteers, may have implications for volunteers who are on benefits or who are charity trustees, and could possibly create a contract with the volunteer.
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What about reimbursing care expenses?

Care expenses may include those for children or adult dependants. As these costs may be significant, your organisation should carefully consider its policy on reimbursing them. 

In particular, your organisation may want to research care costs in the local area. It may wish to recommend a particular agency to its volunteers or set a limit on what will be reimbursed.
 
With care expenses, as with any other expenses, the key principle is that it should be only out of pocket expenses that the volunteer actually incurred.  The volunteer would need to provide a receipt or an invoice to support the expense claim. 
 
Childcare can be divided into “formal” provision and “informal” provision. Your organisation may decide to only cover the costs of a “formal” childcare provider or a registered childminder. Alternatively, you might be happy to reimburse other types of “informal” childcare expenses such as babysitting fees. 
 
When making your decision, there are many factors to consider: 
 
• Some organisations are only allowed to use their funding to cover formal childcare which is given by a registered provider

• Some people believe that informal babysitting does not offer the best or most stimulating education and care for a child on a regular basis. This consideration might be particularly relevant for an organisation which works in the children’s or youth sector and wants to set a Volunteer Policy which is consistent with its wider principles

• Others can feel reluctant to reimburse babysitting costs because it is regarded as a more unofficial method or because babysitters are often family members or close friends of the volunteer

• Alternatively, informal childcare might be more practical for a volunteer in certain situations. For example, it could be the simplest option for a new volunteer who needs time to come for an informal interview and try out their new role for a few weeks

• Or indeed, some children might react better to spending time with a local and well-loved babysitter, than joining a new crèche
 
You may decide to adopt clear criteria on whether your organisation will cover both formal and informal childcare costs, or you may decide that it is better to discuss each case with each individual volunteer.
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What if volunteers are reluctant to claim expenses?

Some volunteers may feel that they do not need or even should not be offered expenses. Explain the equal opportunities issue - that not everyone can afford to write off costs incurred through volunteering. It's important that there is no stigma attached to claiming expenses, so it is better if everyone puts in a claim, even if they return the sum as a donation.

Another key reason for encouraging everyone to claim their expenses is so that organisations can have an accurate picture of real volunteer costs for monitoring reports and future funding applications.
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Can we give volunteers ‘honoraria’?

Some organisations try to avoid problems by referring to payments to volunteers as ‘honoraria’, a payment that is given in return for professional services that are provided without charge.

There are no clear legal rules on what is or is not an honorarium, and such payments are best avoided. While HM Revenue and Customs does accept genuine one-off payments as non-taxable gifts, such payments are likely to affect benefits. If the honorarium is in any way expected, hinted at or regularly given (e.g. a £50 cash sum when the volunteer has completed 6 months of volunteering) it may also be regarded as a payment for services, affecting the legal status of the volunteers, and as taxable income.
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Can I reward volunteers in other ways?

The rule of thumb in rewarding volunteers with tangible items or events is that a volunteer should not be rewarded with anything that either represents a cost to the organisation or that the volunteer could use to make a profit.
 
For example, a discount on purchases for a charity shop volunteer will usually neither cost the organisation anything nor enable the volunteer to make a profit. However, in some cases charity shops buy goods to sell on at a profit. If a volunteer is allowed a discount that is so great that they end up paying less than the shop paid for it, this is clearly a cost to the organisation and could be seen as earnings.
 
Many organisations reward their volunteers by holding events such as awards evenings, parties or dinners. This is totally acceptable, including inviting volunteers and employees to the same event. What is not okay is presenting volunteers with vouchers or tickets to events that the organisation had to buy or that could be sold on by the volunteer. Such a reward clearly has an economic value and, again, could be seen as earnings.
 
Provision of certain paid training courses, unrelated to the volunteering role, can also be seen as an in kind benefit.
 
This isn’t to say that an organisation can’t reward their volunteers with gifts when they leave or after many years of service, but these should be small, such as flowers or chocolates. They should also be ‘one-offs’ to avoid creating an expectation that volunteers will automatically be rewarded. 
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Expenses and employment rights 

If a volunteer gets payment above out-of-pocket expenses, or a reward or benefit in kind, they may be classed as an employee or worker, rather than a volunteer. This includes any promise of a contract or paid work in the future. Being classed as an employee or worker gives them certain employment rights, like getting the minimum wage.  Current minimum wage rates can be found here: https://www.gov.uk/national-minimum-wage-rates.
 
Example 1: Ellie volunteers at a charity to get some work experience. She’s given travel expenses even though she walks to the office. This is payment, rather than out-of-pocket expenses, so she would be eligible for the minimum wage.

Example 2: Dave volunteers for an organisation tending local parks. All volunteers get £3 a week for travel but Dave is responsible for a park close to his home, so he walks there. This means the £3 is a payment and not a reimbursement of expenses. It could count as a contract of employment meaning Dave could be eligible for the minimum wage.
 
Example 3:
Ahmed is a volunteer in a charity shop.  The charity shop buys some new goods such as greeting cards, and sells them for a small profit.  However, Ahmed is given the cards free as perk. The cards are ‘benefits in kind’. They mean he must be paid at least the minimum wage (note that if Ahmed gets a discount on goods that were donated free to the charity, then this is not counted as a benefit in kind, and would not entitle Ahmed to the minimum wage).
 
Example 4:
Aklima is a volunteer at a housing association. She’s been promised that she’ll be taken on as a paid employee after 3 months. This counts as a reward, so she must be paid at least the minimum wage for the whole time she spends at the organisation.
 
Case studies adapted from:  https://www.gov.uk/volunteering/pay-and-expenses
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How is voluntary work defined in relation to state benefits?

Voluntary work is work for a not-for-profit organisation, or work for someone who is not a member of your family, where only reasonable expenses are paid. Some volunteers have been told that they can only volunteer for a registered charity. This is incorrect.
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What state benefits are we talking about?

State benefits are administered by Jobcentre Plus, part of the Department for Work and Pensions (DWP). The main benefits are Jobseeker's Allowance, Income Support, Incapacity Benefit and Disability Living Allowance/Attendance Allowance.  Apart from Disability Living Allowance, these benefits are open only to people who are not in paid employment.  Any kind of paid work would jeopardise an individual's right to claim benefits, and they may find that their benefit payments are docked or suspended. However, expenses do not constitute a payment, so volunteers can receive reimbursement of reasonable out-of-pocket expenses (any expenses that they have incurred because they are volunteering) without their benefits being affected.
 
An expenses record form will enable the organisation and volunteer to record exactly what money the volunteer is getting and to show that it is a reimbursement rather than a payment.  For further information on volunteering while claiming benefits, go to: http://www.dwp.gov.uk/docs/dwp1023.pdf
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Volunteers and tax and national insurance

There are no tax implications for people volunteering provided they receive nothing more than reasonable out-of-pocket expenses. However, if they receive some form of payment above what they have actually spent while volunteering, this will be treated as taxable income, and subject to the same income tax and national insurance regulations as any other earnings. Simply referring to a payment as “expenses” does not make it exempt, nor does describing it as an “honorarium”, “pocket money”, “sessional payment” or any similar term.
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What if we do pay more than actual expenses?

'Volunteers' who receive more than their out-of pocket expenses should be treated for tax purposes in the same manner as paid workers. This includes them providing a P45 form or filling out a P46. If such 'volunteers' receive more than the national insurance threshold from the organisation, in most cases PAYE (Pay As You Earn) should be operated. The organisation would also have to pay employer's national insurance contributions.
 
Some income may simply be declared by volunteers to their local Tax Office and be taxed under self-assessment, but in general it is the organisation's duty to operate PAYE. Failure to do so can have serious consequences.
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Are there any exceptions on paying a flat rate?

As some expenses are paid on a regular basis it is possible to arrange with HMRC to pay some volunteers a flat rate. This is called a ‘dispensation’. It will, in general, only be appropriate for long-term regular volunteers whose expenses will not vary greatly.  Find out more
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Do donated expense payments qualify for Gift Aid?

Volunteers might choose not to claim expenses, or to pay back the expenses they claim to your charity.
 
Gift Aid only applies to gifts of money.  If volunteers decide to support your charity by not claiming the expenses they are entitled to, Gift Aid cannot be claimed on the amount of expenses foregone, as they are not gifts of money.

Where your charity physically pays the expenses to a volunteer, they are free to keep the money or may choose to donate some or all of it back to your charity. Gift Aid can only apply when the volunteer makes an actual payment of money to your charity.
 
For the payment to qualify, the other rules of the Gift Aid scheme must be met, including ensuring that the limits on the value of any benefits given to the volunteer in return for donations are within certain restrictions.
For audit purposes, it is preferable that at least one of the payments by your charity, or by the volunteer, is made by cheque that has been clearly and properly recorded.
 
The 'value' of a volunteer's time as a 'donation in kind' does not qualify for Gift Aid. For further information go to: http://www.hmrc.gov.uk/charities/gift_aid/rules/vol-expenses.htm
 


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