The Covid-19 pandemic has sparked a tremendous amount of interest in employee benevolent societies or hardship funds. Sometimes described as one of the charitable sector’s best kept secrets these occupational societies have seen a resurgence as many employees and their dependants face financial hardship. Currently in the UK there are over 3,000 benevolent societies/hardship funds
Largely borne out of the industrial revolution and before the creation of the welfare state which sought to provide state pensions and social security benefits, benevolent societies can be established to provide a wide range of assistance and services for people with connections to particular industries, trades and professions. Originally set up by occupational groups – for example, police officers, armed forces, road hauliers, vicars, musicians and health service employees – many societies have modernised and rebranded themselves in response to modern day needs. Even before the Covid 19 pandemic struck, the number of people turning to these societies showed a sharp increase in recent years due to (amongst other things) declining living standards, high levels of personal debt, wage freezes and the pressures of stressful working lives.
Setting up a Benevolent Society or Hardship Fund
In recent years establishing a Charitable Incorporated Organisation (CIO) has become the most popular structure for those employers who decide to set up a benevolent society or hardship fund for the long term. CIO’s are run by a body of trustees, benefit from significant tax benefits and will have a detailed constitution governing their operation. Setting up a charity also fits well with employers’ corporate social responsibility and allows donations and bequests to be made and received.
Less formal structures such as ad-hoc taxable grants or making of loans to those in need are also possible. Employee benefit trusts can also be used in order to relieve hardship.
What sort of help can be offered?
A wide range of assistance can be made available via these arrangements. Traditionally, funds tended to focus on general financial help as a result of unemployment, bereavement or ill-health. This could be for one off expenses such as funeral expenses, holiday grants or residential care to regular payments covering education, training or accommodation costs. However, forward thinking funds are now committed to providing more than this in order to reach a younger audience, often in decent jobs but with limited savings who are at the mercy of a single lifestyle event (illness, bereavement, unemployment) causing a spiralling crisis. Many are adopting a preventative and more holistic approach to offering help and support. For instance, some funds provide access to helplines offering counselling services on issues as diverse as career progression, workplace bullying, drug abuse, claiming benefits and legal issues. With the isolation many are now facing as a result of the Covid 19 pandemic and working from home, many funds are also focussed on combating loneliness by offering regular phone calls or visits where possible.
The benefits of setting up a CIO
The benevolent society will have a ‘legal personality’ of its own, meaning unlike unincorporated entities such as charitable trusts, it can conduct business freely in its own name in the same way as a company can, without the added bureaucratic burden of answering to both the companies and charities regulators (as it would if structured as a charitable company). Trustees of the CIO are usually personally safeguarded against any financial liabilities incurred by the charity (in the same way that directors of a company are), which is not usually the case for unincorporated charities or other unincorporated groups..
Finally, as a charity the CIO will benefit from specific tax exemptions and reliefs which can allow tax free provision of support to employees as well as tax reliefs for those who donate to the CIO and for the CIO upon receipt of donations.
There remains a strong need to raise awareness of these funds and the benefits they can offer.
Wedlake Bell’s Pensions & Employee Benefits and Charities’ specialists provide a comprehensive and holistic approach to employers looking to explore these arrangements. We are very well placed to advise on this area including the coordination of applications to The Charity Commission and drafting all necessary legal documentation.