Please note that this blog post is based on our own research and should not be considered as advice around benefits or taxation. We encourage people to do their own research and consult with a professional benefit advisor or accountant.
As participatory grant-makers, we are always thinking of how to overcome barriers people may have to participation. One of the barriers is, as in so many things, money.
Not all funders pay people for taking part in participatory grantmaking but both Islington Giving and Barking and Dagenham Giving prioritise payment as part of our work with residents.We believe payment broadens the range of people who can participate. People with childcare requirements or who are in low paid jobs, might not be able to afford to take part in a participatory process if the role is not paid. Compensation acts as a leveller, removing a financial barrier to taking part. If we are serious in opening up grant making to people with a range of lived experience, this inevitably means working with people on low and precarious incomes so it is vital that we think about compensation. In addition, both organisations believe that if staff time is given a monetary value, the same should apply to participatory grant makers.
There are challenges around this approach, particularly for participants in receipt of UK benefits. However, assuming you have decided that paying participants for their time is the right thing to do, the remainder of this post offers some pointers based on our own experiences.. While some of it may translate internationally, much of this is specific to the issues faced by UK grant-makers.
Perils of payment
With some exceptions, Her Majesty’s Revenue and Customs (HMRC) allows people to earn up to £1,000.00 in both property and trading income without paying tax on it. For most employed people, this is enough to allow them to be compensated for taking part in a participatory process without needing to file a tax return.
There are two groups, however, who don’t have the same luxury — the self-employed and those in receipt of benefits. For self-employed people, anything earned over that £1,000.00 threshold needs to be submitted in an annual self-assessment (again, with some exceptions).Tax will be due once the basic income tax threshold is reached. .
For people on means-tested benefits, they will need to report any income they receive to the Department for Work and Pensions (DWP). Universal Credit is designed to encourage people back into work so if a claimant is also earning, benefits are reduced in a taper. The claimant will lose some of their benefits but, in theory, should be slightly better off. There are two exceptions to this. One is for claimants looking after a child or young person. The other is for people claiming a disability allowance. Personal Independence Payments (PIP) is not related to income (or the old Disability Living Allowance if someone was given a lifetime award). However, anyone in receipt of a PIP payment should be made aware that taking part in a participatory panel may be seen as an indication that they are fit for work. While payments won’t impact on their benefit, it could trigger an investigation into their current PIP claim.
To put it another way, imagine you have three people in your process: someone in full-time employment; a sole, self-employed trader; and someone who is in receipt of a means-tested benefit. You pay each of these people £100.00 for the time they spend assessing applications.
- To the person in full or part-time employment, that £100.00 is additional money in their pocket to spend as they like. However, if the funder pays via payroll, tax and national insurance will be taken from the payment at source.
- The sole trader has to add the £100.00 to their self-assessment tax return and may have to pay tax and national insurance contributions (possibly student loan as well).
- The person in receipt of benefits informs their benefit advisor, who proceeds to deduct a tapered amount from their next payment, leaving the person only slightly better off
Someone receiving a means tested benefit has to be made aware of the possible implication on their benefit income (or that of the household in which they live). It is therefore essential that people in this position seek advice from a benefits’ officer or an advice provider such as Citizens Advice (CAB). As funders, we should not offer any advice ourselves, either on benefits or tax implications.Individuals must seek advice on their personal situation. At Islington Giving, we have established links with CAB and Islington Council’s Income Maximisation Team, and can sign post participants to those sources of advice.The worst-case scenario would be for someone not to report this income and as a result are subsequently penalised by the benefits system, plunging them into debt or arrears a few weeks later. This could do incredible damage to the relationship between a funder and community member and, more importantly, leave a participant in a precarious financial position.
Islington Giving are currently offering all participants payment at the London Living Wage for each hour given to a programme. We make these payments through our payroll. Our finance team set up each new participant as payroll recipient and participants sign a contract. While this is work for our finance team, our auditors have said they are happier with this approach. It does mean we pay appropriate national insurance contributions for each person on the payroll and deduct tax if that is appropriate.
However, we are aware that because of the issues described above, some participants may see payment as a barrier to joining a panel, so residents also have the choice to opt for a catalyst award at the end of a panel, an item rather than a cash payment or vouchers.
Depending on the type of participation, it may be possible to have the payment counted as a ‘research’ payment, which sidesteps some but not all of these issues. It doesn’t apply to decision-making as that is considered operational but paying people to allow them to take part in consultation workshops and the like would probably meet the criteria — basically anything where the main output is your charity learning something, rather than doing something.
However, when it comes to decision-making itself, the choices do get narrower. The simplest solution is to not give people a cash payment but rather offer a shopping voucher or an item of equivalent value — as long as it isn’t possible for the vouchers or item to be returned for the price that was paid for them. At Islington Giving, while we prefer to offer payment, we have also used a “catalyst award” at the end of a programme, where participants can choose an item or experience to an agreed value, paid for by the funder.
Another option which BD Giving is trialling is to offer participants the chance to pass on their payment to a local charity, as a donation made in their name. This opens the possibility to further strengthen relationships in the community and also offers a chance for support by proxy — not everyone is able to volunteer for charities they support but they could take part in one of our processes and also provide benefit to another local cause close to their heart.
There is also the option of using time credits, something like Tempo, for example, where volunteer hours are rewarded by credits to be spent with local businesses.We haven’t tested this ourselves but it is another way to go.
While complicated, BD Giving is also looking to trial a blended approach, wherein participants could split their payment along three lines — cash, vouchers/items, and donations — to see if moving away from an ‘all-or-nothing’ model is beneficial to people.
Ultimately, it comes down to giving participants a choice in the decision about how they are compensated. Like many participatory grant-makers, our approach is based on trust. We don’t believe that it is our role to act as an enforcer. We trust that people will do what is required of them, and that it is our responsibility to give people what they need to make an informed choice about what best suits their circumstances.
It has been encouraging to see a developing cross-party consensus that community-led decision-making needs to be well resourced. After all, while we believe that the benefits of a participatory approach make it autotelic — that is, it is an end in and of itself — the amount of money a community has control over will obviously increase the number of options available to them, and even free up space for them to experiment and refine. However, this has to come with additional support to enable people from all walks of life to fully participate. As funders, it’s important for us to remember that we don’t work in a vacuum and structures like benefits and taxation have a very real influence on the money that we spend. We would like to see conversations start to happen about how the systems currently in place might be able to accommodate participatory work.