The Case For and Against Remunerating Non-Executive Directors on Not-for-Profit Boards in Australia: An Investment Propellant for Growth or a Risk to the Volunteer Ethos?
Updated: Sep 28
Not-for-profit (NFP) organisations are the backbone of Australian society. They fill the gaps left by the government and private sector by delivering essential services in health, aged care, social services, education, environment, and community support. However, the demands on their boards have never been greater. Rising regulatory scrutiny, cyber risks, funding pressures, and the need for strategic growth mean non-executive directors (NEDs) are shouldering more responsibility than ever.
One question is increasingly top-of-mind for NFP boards: Should we remunerate our non-executive directors?
At Sadhana Consulting, we help NFPs strengthen governance through Board Performance Reviews, strategic planning, and financial management. The debate around director remuneration is not black-and-white. It can be a powerful investment in growth - or a step that risks diluting the very volunteer spirit that defines the sector. This decision requires careful consideration for an informed outcome.
Here’s a balanced, evidence-based look at both sides, grounded in the latest data from the Australian Institute of Company Directors (AICD) and the Australian Charities and Not-for-profits Commission (ACNC).
The Case For: Remuneration as a Strategic Investment Propellant for Growth
Modern NFP boards operate in a complex environment. The AICD’s Not-for-Profit Governance & Performance Study 2025-26 reveals that 27% of non-executive directors are now remunerated (up from 24% in 2024). This trend is most pronounced in larger or more complex organisations. Directors are committing significant and increasing time, often including multiple board and committee meetings, site visits, professional development, and preparation. They also shoulder heightened legal liabilities under the Corporations Act, ACNC Governance Standards, and sector-specific regulations.
Remuneration acts as a catalyst for sustainable growth in several ways:
Attracts and retains top talent, specialist skills, and diversity. Paying directors helps NFPs compete for candidates with expertise in finance, cyber risk, digital transformation, compliance, and lived experience. It removes financial barriers for younger professionals, people from disadvantaged backgrounds, or those with caring responsibilities. This broadens the talent pool and boosts inclusivity and innovation. Market data shows that remuneration is increasingly used to support succession planning and ensure boards have the right mix of skills for strategic delivery.
Professionalises governance and drives performance. Remuneration creates “skin in the game,” fostering greater accountability, engagement, and commitment. Directors approach their role with heightened rigour, which strengthens strategic oversight, risk management, fundraising effectiveness, and long-term sustainability. This can directly multiply organisational impact - growing revenue, visibility, and mission delivery. Many organisations view modest or median-level fees as a small outlay compared to the value delivered through stronger governance.
Delivers clear return on investment. In today’s environment, top-quality governance is a growth propellant. Remuneration recognises the real time commitment, expertise, and personal risk directors accept. It positions NFPs to navigate complexity more effectively, supporting ambitious strategic objectives without compromising purpose. Many boards start with modest fees and transition to reasonable levels (with annual CPI reviews) as financial capacity allows, ensuring affordability while building board strength.
Supports inclusivity without losing volunteer ethos. Remunerated directors may still donate fees back or volunteer extra time. It legitimises the contribution while opening doors to a wider, more diverse pool of candidates.
For NFPs facing skills gaps or growth ambitions, targeted remuneration is a smart, strategic lever.
The Case Against: Why Many Not-for-Profit Boards Choose to Stay Voluntary
Despite the upward trend, the vast majority of NFP boards remain unpaid. There are compelling reasons to preserve the volunteer model.
Key arguments for staying voluntary include:
Protecting the mission and donor trust. Every dollar spent on directors’ fees is a dollar not directed to frontline services. Some donors and supporters view payment as inconsistent with the charitable ethos, potentially harming fundraising and public perception. The ACNC emphasises that payments must further the charitable purpose and be carefully justified.
Preserving the volunteer spirit and moral authority. The heart of the NFP sector is community-driven altruism. Payment risks attracting people for the wrong reasons or creating internal tensions. Many directors proudly serve without pay, seeing it as part of their contribution to a better world. The traditional volunteer model continues to attract passionate, mission-aligned leaders effectively.
Financial and practical realities. Remuneration introduces new costs and complexities: Constitutional amendments, member approval at AGM, tax and superannuation implications, additional ACNC reporting, and ongoing financial sustainability assessments. For many organisations - particularly smaller or donation-reliant ones - it simply isn’t affordable or necessary. Stakeholders may also regard it as an unnecessary expense, creating reputational considerations.
No guaranteed improvement in outcomes. While remuneration can widen the candidate pool, there is no automatic assurance of better performance. The volunteer model keeps costs low, maintains public trust, and upholds core values where organisations are community-embedded.
Staying voluntary continues to work well for many NFPs, especially where passion and purpose are the primary drivers.
Weighing the Decision: What’s Right for Your Organisation?
There is no one-size-fits-all answer. Remuneration suits larger or more complex NFPs where governance demands are high and growth ambitions significant. For others, the volunteer model remains powerful and appropriate.
Key questions to ask your board:
Can we afford meaningful remuneration without impacting programs?
Does our Constitution and funding agreements allow it?
Are we struggling to attract the specialist skills needed for growth and compliance?
How will stakeholders (donors, members, funders) perceive the change?
Transparency is non-negotiable: any decision must further the charitable purpose, be reasonable, properly authorised, and clearly communicated (per ACNC guidance). Many organisations adopt a staged approach - starting modestly, reviewing annually against financial sustainability and CPI, and adjusting as capacity grows.
At Sadhana Consulting, we recommend starting with an independent Board Performance Review, which can include a remuneration benchmarking exercise with options for consideration. This process evaluates current governance effectiveness, structure, identifies skills gaps, and provides clear recommendations on whether remuneration (or other enhancements like targeted training or board size adjustments) would propel your organisation’s growth.
Since this article was first published, the Australian Institute of Company Directors has released its June 2026 Not-for-profit director remuneration guide. The guide does not tell boards they should pay directors. It sets out a five-step process: threshold questions (purpose, an identifiable governance problem, and affordability), due diligence, stakeholder consultation, a formal decision, and implementation only where remuneration is justified. That is the same sequence most boards need help to complete with evidence rather than instinct.
Ready to Strengthen Your Board for Sustainable Growth?
The debate in this article is useful. The decision for your organisation is specific. Constitution wording, funding agreements, skills gaps, time commitment, donor perception, ACNC private-benefit rules, tax and superannuation, and what comparable NFPs actually pay all sit underneath the yes/no question.
Sadhana Consulting conducts independent directional reviews of board remuneration and governance settings for Australian NFPs and charities. The purpose is the same one boards bring to us: support a stable, capable and sustainable board over time, aligned to the size and complexity of the organisation - whether the outcome is to remain voluntary, introduce modest fees, or stage a transition.
A typical review covers:
Background documents: constitution, board charter, policies, recent board papers, funding conditions and any existing remuneration or expense arrangements
Discussions with the Chair, CEO and other key personnel to understand workload, skills needs and stakeholder constraints
Benchmarking against similar organisations by sector, scale and complexity, using AICD and market data
Options for the director model (volunteer, honorarium, meeting fees, annual fees, Chair loading, staged introduction) with practical, compliance-aware implications
A concise options report the board can use for a recorded decision, member communication or AGM resolution
If your board is weighing remuneration, filling a skills gap, or testing whether current governance settings will hold as the organisation grows, start with a confidential 15-minute discovery call. We will tell you quickly whether a directional review, a full board performance review, or a narrower benchmarking note is the right next step.
Or email kylie.johnson@sadhana.com.au
Ph: 0403 500 754
Governance services: sadhana.com.au/governance-compliance
Article by
Kylie Johnson FCPA, FGIA, MAICD
Principal Consultant
Sadhana Consulting
Frequently asked questions: NFP director remuneration reviews in Australia
Can an Australian charity pay its non-executive directors?
Yes, if the constitution or rules allow it (or are amended), the payment further the charitable purpose, it is reasonable, it is properly authorised, and it is not an ACNC private benefit. Many constitutions still prohibit payment, so that document is the first thing to check.
What does an independent remuneration and governance settings review include?Document review, discussions with key personnel, benchmarking against similar organisations, options for the director model, and a concise options report. It can sit on its own or form part of a broader board performance review.
How is this different from a full board performance review?
A remuneration review answers whether and how to pay (or stay volunteer) and whether governance settings support a sustainable board. A full board performance review assesses collective and individual effectiveness, the Chair, skills mix, papers and culture. Many boards commission the narrower review first.
Does paying directors automatically improve performance?
No. Remuneration can widen the candidate pool and recognise time and risk. It does not guarantee better oversight. The AICD’s 2026 guide treats payment as one possible response to an identified governance problem, not a default.
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