What are the advantages and disadvantages of a token salary?
<p>I am writing an employment contract for a voluntary position at a charity and am wondering whether we should pay the individual £1 per year to demonstrate that they are a paid employee. What would be the advantages and disadvantages of this?</p>

<h2>If you pay someone, they are an employe - not a volunteer</h2>
<p>If they are an employee they have all the rights of an employee. This includes minimum wage laws so you can only pay them £1/year if they work less than 6 minutes 31 seconds per year.</p>

<h1>To be a valid contract, there needs to be a consideration on both sides.</h1>
<p>A contract is not enforceable if it is void. A contract is void <em>ab-initio</em> if one side does not get any consideration at all. Some considerations violate public policy or are &quot;Sittenwidrig&quot; (~immoral) and thus are void. Also, contracts for something illegal are void.</p>
<p>Some examples:</p>
<ul>
<li>A contract that promises Alice all of Bob's money but Bob gets nothing in return is not a contract that can be enforced as one. In the best case, it is a gift, promise of a gift, or trust, upon which relief can be granted.</li>
<li>A contract for sex (outside of prostitution!) is usually violating public policy and is &quot;Sittenwidrig&quot;. As such, if Alice's contract with Bob reads, that Alice pays Bob but forces him to have intercourse with her, that contract is void: Consent to sexual actions can be withdrawn, and a contract that would overwrite that is null and void.</li>
<li>If Alice is an Assasin on Bob's payroll, the possible employment contract to go out and murder people for Bob is null and void: murder is a capital crime, so the contract is void.</li>
</ul>
<h1>To be an enforceable employment contract, it needs to fulfill labor laws.</h1>
<p>Often labor laws stipulate a minimum consideration, which is the absolute minimum before a contract violates public policy. If the contract does not fulfill the stipulated minimum wages, the contract might not be <em>totally</em> void, but it most certainly isn't enforceable in the form written either.</p>
<p>A not enforceable contract might be <em>cured</em> in some way or another, for example by changing the payment value to the statutory amount, or by allowing the sides to cancel. In such a case, the law overwrites the contract.</p>
<p>However, other considerations also might be given as part of the pay and then their value is to be considered part of the wages. Such consideration might be very varied. Some of the more common ones are <em>free access to facilities</em> [but for work reasons] or <em>goods in lieu of pay</em>. Sometimes, these values are not easily quantifiable, but they are still considered part of the payment and have to be assigned some value. A few random examples:</p>
<ul>
<li>My church's Janitor lives for free in a flat as part of his pay. The value of the flat is calculated by the price of a flat with a similar setup.</li>
<li>A trainee at a mechanics shop may use the machinery after hours for personal projects, provided they pay for the material. The value of such would be calculated by access fees to a similar fab-lab but is usually neglectable.</li>
<li>A personal trainer at a Gym is allowed to take up to a specified ammount worth of snacks from the snack bar without paying. The value of this could be the maximum amount of goods that can be claimed.</li>
<li>A farmer's farmhand takes a portion of the harvested goods as their payment. The value is obviously the <em>fair</em> price of these goods.</li>
</ul>

<p><strong>You absolutely should not do this</strong>. A volunteer is, by definition, a person who <em>chooses freely</em> whether or not they work. They can turn up one day and work as you had hoped they would and the next day they can fail to show up even though they said they would, without any contractual repercussions.</p>
<p>An employee on the other hand is someone who has entered into a contract to work for their employer and has <em>rights and obligations</em> under that contract. An employee is <em>not</em> a volunteer because they cannot choose whether or not to work.</p>
<p>Therefore, the phrase &quot;<em>I am writing an employment contract for a voluntary position</em>&quot; is a contradiction in terms.</p>
<p>The biggest disadvantage you will face by using an employment contract (which you will impliedly do if the document grants a right to a £1 salary), as pointed out in other answers, is that the purported volunteer will acquire various statutory rights such as the right to statutory leave and the right to minimum wage. That is because, as soon as you enter into an employment contract with that person, they become a &quot;worker&quot; in law. See <a href="https://www.legislation.gov.uk/ukpga/1998/39/section/54" rel="nofollow noreferrer">Section 54(3)</a> of the National Minimum Wage Act 1998:</p>
<blockquote>
<p>In this Act “worker” (except in the phrases “agency worker” and “home
worker”) means an individual who has entered into or works under (or,
where the employment has ceased, worked under)—</p>
<p>(a) a contract of employment; [...]</p>
</blockquote>
<p><a href="https://www.legislation.gov.uk/ukpga/1998/39/section/1" rel="nofollow noreferrer">Section 1(2)</a> provides:</p>
<blockquote>
<p>A person qualifies for the national minimum wage if he is an
individual who— (a) is a worker; (b) is working, or ordinarily works, in
the United Kingdom under his contract; and (c) has ceased to be of
compulsory school age.</p>
</blockquote>
<p>There have been various cases in courts where purported volunteers have sued the employer, sometimes many years later, for very large sums in relation to back-pay and statutory leave, due to being deemed employees instead of volunteers. In the worst case scenario (e.g. the charity is structured as an unincorporated trust; quite common for smaller charities), the charity trustees can become <em>personally liable</em> for such claims to the extent that they exceed the charity's funds. Definitely not a situation you want to put the charity in.</p>
<p>The correct approach is to draft a volunteer agreement and to bear in mind the following important points:</p>
<ul>
<li>Avoid the word &quot;<em>contract</em>&quot; or anything which implies that the document is legally binding on the parties. The word &quot;<em>agreement</em>&quot; is fine because contracts are a subset of agreements and an agreement doesn't become a contract unless there is consideration and intention to create legal relations.</li>
<li>Explicitly state that the agreement is not intended to be legally binding e.g.: &quot;<em>This agreement is binding in honour only, is not intended to be a legally binding contract between us, and may be cancelled at any time at the discretion of either party. Neither of us intends any employment relationship to be created either now or at any time in the future.</em>&quot;</li>
<li>Avoid words such as &quot;<em>must</em>&quot;, &quot;<em>shall</em>&quot;, or anything which implies a right or an obligation on the parties. Instead use phrases such as &quot;<em>we hope that you will</em>&quot; or &quot;<em>it is preferred that</em>&quot;.</li>
<li>For example, you might write a paragraph which states &quot;<em>Ideally, we would like you to volunteer for 4 hours every Tuesday and 4 hours every Wednesday if you are able and willing, but you are under no obligation to do so</em>&quot;.</li>
<li>As Practical Law puts it (see links below), &quot;<em>volunteer agreements are generally short, informal in style, and phrased in terms of hopes and expectations rather than obligations</em>&quot;.</li>
<li>Absolutely avoid any kind of binding commitment for the volunteer to work or any right to be paid a salary.</li>
<li>It is fine for the volunteer to be able to recover their reasonable <em>expenses</em> such as food and travel, but be careful to keep the scope narrow and to ensure that the volunteer can only recover their <em>actual costs</em> that they incur <em>directly as a result</em> of the volunteering. There has been case law to establish that something like an allowance of £25 per week for expenses can result in the purported volunteer becoming an employee because the £25 doesn't represent the actual cost of expenses and is therefore a salary (<a href="https://www.bailii.org/uk/cases/UKEAT/1998/1400_97_2807.html" rel="nofollow noreferrer">Migrant Advisory Service v Chaudri UKEAT/1400/97</a>)</li>
<li>If you do pay expenses, make sure to keep receipts and documentation so that you can later prove that the payments were for actually incurred expenses.</li>
</ul>
<p>This is the approach which is recommended by Practical Law and which I've adopted in my own charity legal work. If you have access to Practical Law then I recommend the following (paywalled):</p>
<p><a href="https://uk.practicallaw.thomsonreuters.com/3-504-6237" rel="nofollow noreferrer">Volunteering and internships: employment law issues</a></p>
<p><a href="https://uk.practicallaw.thomsonreuters.com/0-504-6074" rel="nofollow noreferrer">Standard document: volunteer agreement</a></p>
<p>If you don't have access, you may also want to take a look at the <a href="https://beta.ncvo.org.uk/help-and-guidance/involving-volunteers/recruiting-and-welcoming-volunteers/writing-a-volunteer-agreement/" rel="nofollow noreferrer">NCVO's guidance</a>.</p>

employment england-and-wales charity