As a consequence of Covid-19 (Coronavirus) and the cost of living crisis, many employers are considering how they might offer support to current employees in financial difficulties.
One way to support them is to set up a charitable staff hardship fund, which can be used to give financial support to members of a defined class of people called beneficiaries and is aimed at relieving or preventing them from falling into poverty. The class of beneficiaries might include employees, former employees, pensioners, and their families and dependants.
It is usually not lawful for a charity to have a beneficiary class which is connected by employment, but there is an important exception for charities that relieve poverty. This was confirmed by the Upper Tribunal in the Attorney General v Charity Commission for England and Wales and others (2012). On that basis, it is possible for businesses and not-for-profits to establish charitable funds in order to support employees, former employees and their families who are struggling financially.
In operating a charitable staff hardship fund, it is important to make sure that funds are directed appropriately to the relief or prevention of poverty in a charitable sense. This will usually require careful means testing of those being supported, for example, putting in place financial thresholds and appropriate eligibility criteria. In practice, the fund might be used to help with rental payments, paying for essential items, in providing debt relief advice and so on.
Employers can establish a hardship fund as a new charity which they register on the Charity Commission’s Register of Charities. Or, to provide a faster response, organisations which already have a charitable corporate foundation may be able to channel hardship funds for employees through their foundation subject to appropriate advice, or use a donor advised fund or existing charity to house the fund.
Helpfully, from a tax perspective, donations to a charitable staff hardship fund can be made tax efficiently by employers and members of staff by donating through Gift Aid.
Get in touch if you would like to discuss your particular circumstances and what would work best for your organisation and your staff.
This article was first published in August 2021 in Employee Benefits magazine.