By Raz Toor, Lawyer and Founder of Falcon Law PC
Yes, a Canadian charity can generally pay employees and officers for genuine work performed for the organization. The more difficult question is whether the person being paid is also a director of the charity.
That distinction matters because charities are allowed to hire staff and pay reasonable compensation, but directors of charitable corporations are subject to additional conflict-of-interest and fiduciary rules. In Ontario in particular, a director cannot simply decide to draw a salary from the charity because they are also its president, founder, treasurer, or executive director.
I’m Raz Toor, the founder of Falcon Law PC. We regularly assist charities and non-profit organizations with incorporation, charitable registration, by-laws, governance structures, board issues, and ongoing compliance. When compensation is being considered, one of the first questions I ask is: What legal role does this person actually hold?
A founder, officer, employee and director can sometimes be the same person, but the legal rules applicable to each role are not necessarily the same.
Can a Charity Have Paid Employees?
Yes.
Registered charities are not required to operate entirely through volunteers. Many charities employ executive directors, program staff, administrators, fundraisers, professionals, support workers and other employees.
The Canada Revenue Agency expressly recognizes salaries, wages, commissions, bonuses, fees, honoraria and employment benefits as forms of compensation paid by registered charities.
A charity can therefore use charitable resources to pay people who perform legitimate work that advances or supports the organization’s charitable purposes.
The key considerations are generally whether:
- the work is genuinely required by the charity;
- the compensation is reasonable;
- the arrangement provides value to the charity;
- the payment does not create an improper private benefit;
- applicable conflict-of-interest rules are followed; and
- the charity’s governing documents permit the arrangement.
Can an Officer of a Charity Be Paid?
Often, yes.
An officer is generally someone appointed to an organizational position such as president, vice-president, secretary, treasurer, executive director, or another management role established by the corporation’s by-laws or board.
An officer who is not also a director can generally receive reasonable compensation for services provided to the charity, subject to the charity’s governing documents, employment arrangements, conflict rules, and the requirement that charitable resources be used appropriately.
For example, a charity may appoint an executive director who manages the organization’s staff and programs and receives an ordinary salary for that work.
The situation becomes more complicated where the officer also serves as a director.
The Important Question: Is the Officer Also a Director?
Titles can cause confusion.
A charity may refer to someone as its president, chair, executive director, founder or treasurer, but the title alone does not determine whether the individual can be paid.
I would look at:
- the corporation’s articles;
- its by-laws;
- the current board composition;
- director resolutions;
- officer appointments;
- employment agreements; and
- the actual responsibilities performed by the individual.
If the person is an officer but not a director, the compensation analysis is generally much more straightforward.
If the person is also a director of an Ontario charitable corporation, additional restrictions apply.
Can an Ontario Charity Pay Its Directors?
Ontario charity law starts from a restrictive position.
Directors of charitable corporations have fiduciary responsibilities concerning charitable property. As a general rule, a director should not receive remuneration simply for serving as a director.
The fact that Ontario’s Not-for-Profit Corporations Act, 2010 generally permits not-for-profit corporations to remunerate directors and officers does not, by itself, solve the issue for a charitable corporation. Ontario specifically recognizes that the separate rules applicable to charitable property can override the general ONCA remuneration provisions.
This is one of the most important differences between an ordinary non-profit corporation and a charitable corporation.
Ontario Regulation 4/01 Provides Limited Exceptions
Ontario Regulation 4/01 under the Charities Accounting Act allows certain payments to directors of charitable corporations, and to certain people connected to those directors, without first obtaining a court order.
However, the Regulation contains detailed requirements and should not be treated as a general authorization to put directors on salary.
Among other things, the Regulation can permit certain payments for goods, services or facilities provided to the charity, provided the statutory conditions are satisfied.
Those requirements include matters such as:
- the payment being in the charity’s best interests;
- the amount being reasonable;
- advance written approval requirements;
- the interested director not participating in the decision;
- minimum board-composition requirements;
- limits on how many directors or connected persons can receive payments; and
- proper documentation of the arrangement.
Importantly, the Regulation does not provide a blanket authorization to pay a director for acting as a director. It also contains specific exclusions, including certain employment, fundraising, and real-property arrangements.
Where the proposed payment does not fit within the Regulation, court approval may be required.
What if the Founder Wants to Work Full-Time for the Charity?
This is a common practical issue.
A founder may create the organization, serve on the initial board, spend substantial time developing its programs, and eventually want the charity to become their full-time occupation.
There is nothing inherently improper about a founder being paid for legitimate work. The issue is how the governance structure is organized.
For example, if the founder remains a director of an Ontario charitable corporation while also seeking regular employee compensation, the arrangement requires more careful analysis than simply approving an employment agreement.
In some circumstances, the cleaner governance structure may be for the individual to serve as a paid executive or employee without also serving as a director. Whether that is appropriate depends on the charity’s structure, board, governing documents, and operational needs.
The point is not that founders must work for free. It is that the board and management roles should be structured deliberately.
Reasonable Compensation Matters
Even where the charity is legally permitted to compensate the individual, the amount still matters.
A registered charity exists to pursue charitable purposes rather than to provide financial benefits to insiders.
The CRA’s guidance recognizes that reasonable payment for genuine property or services is not, by itself, an undue benefit. The problem arises where the payment is excessive or out of line with the value of the services received.
In practical terms, a charity considering executive compensation should be able to explain why the amount is reasonable.
Depending on the organization, that might involve considering:
- the individual’s responsibilities;
- hours of work;
- professional qualifications;
- the size and complexity of the organization;
- comparable compensation at similar organizations;
- the charity’s financial resources; and
- the market value of the services being provided.
The board should also document how the compensation decision was made.
What Is an Undue Benefit?
Federal charity law is concerned with charitable assets being diverted for the personal benefit of insiders.
An undue benefit can arise where a charity provides an inappropriate financial advantage to a director, member, significant contributor, non-arm’s-length person, or another person connected with the charity.
Paying someone for legitimate services at a reasonable market rate does not automatically create an undue benefit.
By contrast, concerns can arise where:
- the salary is substantially above market value;
- the individual is being paid without performing meaningful work;
- personal expenses are being paid by the charity;
- bonuses are unrelated to legitimate organizational performance;
- a related business is being overpaid for services;
- the compensation arrangement was not properly approved; or
- the charity cannot explain how the payment advances its interests.
The CRA has financial penalties available where a registered charity confers an undue benefit, so this is not simply an internal governance concern.
Can Family Members of Directors Be Paid?
Potentially, but these arrangements require additional care.
Ontario Regulation 4/01 specifically addresses certain persons connected to directors, including spouses and specified family members, as well as certain corporations, employers and partnerships connected with the director.
That does not mean related persons can never provide goods or services to a charity. It means the relationship creates a conflict that needs to be recognized and handled under the applicable rules.
For example, if a charity wants to hire a company owned by a director’s spouse, the board should not treat that arrangement like an ordinary arm’s-length purchase without first considering the charity-law requirements.
Conflicts of Interest Need to Be Managed Properly
Whenever a director, officer or related person has a financial interest in a transaction involving the charity, the board should consider the applicable conflict-of-interest rules.
That commonly means:
- disclosing the interest;
- recording the disclosure in the minutes;
- having the interested person abstain from voting where required;
- excluding the interested person from discussions where required;
- ensuring the remaining directors make an independent decision;
- confirming that the terms are reasonable; and
- keeping appropriate supporting records.
A conflict is not always fatal to a proposed arrangement. The important issue is whether it is legally permitted and handled transparently and properly.
What Should the Charity’s By-Laws Say?
The by-laws should clearly distinguish between the board’s governance role and the officers or employees responsible for day-to-day operations.
I would generally want the by-laws to address matters such as:
- appointment and removal of officers;
- officer responsibilities;
- whether officers must also be directors;
- conflict-of-interest procedures;
- director remuneration restrictions;
- expense reimbursement;
- board approval requirements; and
- delegation of operational authority.
Poorly drafted by-laws sometimes create the compensation problem in the first place. For example, if the by-laws require the president to be a director but the organization later wants the president to become a full-time paid executive, the existing governance structure may need to be reconsidered.
This is why our non-profit and charity law practice regularly reviews governance documents alongside the operational issues the organization is trying to address.
Federal Incorporation Does Not Eliminate Provincial Charity-Law Issues
Some charities are incorporated federally under the Canada Not-for-profit Corporations Act rather than under Ontario legislation.
The federal statute generally permits reasonable remuneration for directors, officers and members where the corporation’s governing documents allow it.
However, Corporations Canada specifically cautions registered charities that provincial or territorial charity law may impose additional restrictions on director remuneration.
Accordingly, a federally incorporated charity operating in Ontario should not assume that the federal corporate statute alone determines whether a director may be paid.
Non-Profit Does Not Automatically Mean Charity
It is also important to distinguish between a non-profit corporation and a registered charity.
Not every non-profit corporation is a charity.
An ordinary Ontario non-profit corporation that is not charitable may have significantly more flexibility to compensate directors, officers and employees, subject to ONCA, its articles and by-laws, conflict-of-interest requirements, and other applicable law.
A charitable corporation is subject to the additional body of charity law governing charitable property and fiduciary obligations.
This distinction matters when organizations search online for a simple answer about whether a “non-profit director” can be paid. The answer may be different depending on whether the organization is legally charitable.
Compensation Also Has CRA Reporting Consequences
Registered charities report compensation information through their annual T3010 Registered Charity Information Return.
The CRA requires reporting concerning the charity’s employees and compensation, including compensation ranges for the organization’s highest-paid employees.
That does not mean individual salaries are necessarily published by employee name, but compensation is part of the charity’s regulatory reporting framework.
A charity should therefore have proper payroll, accounting, employment, and governance records supporting compensation paid to its staff.
What We Have Been Working On With Charities in 2026
Our recent charity and non-profit work has reinforced how important it is to get the governance structure right before operational issues become more complicated.
In one matter, we advised an established religious charity on a broader by-law and governance review, including board composition, director eligibility, membership rights, voting provisions, and how decision-making authority should operate within the organization.
In another matter, we assisted with establishing a new family-funded charitable foundation, including incorporation, charitable purposes, governance structure, organizational documentation, and preparation for the CRA charity-registration process.
We have also worked with mission-driven non-profit organizations on governance modernization, including board and member processes, corporate records, by-laws, and ongoing statutory compliance.
These matters are different, but they reinforce a practical point that applies to compensation as well: the legal answer often depends on how the organization has divided governance, management and ownership-like control. Before deciding whether a founder or officer should be paid, I would first make sure we understand whether that person is also a director and what the organization’s governing documents actually say.
The examples above have been anonymized and certain details have been generalized to protect client confidentiality.
A Practical Checklist Before Paying an Officer or Founder
Before a charity starts paying an officer, founder or other insider, I would generally want answers to the following:
- Is the organization a registered charity or only a non-profit corporation?
- Where is the organization incorporated?
- Where does the charity operate?
- Is the person a director?
- Is the person an officer?
- Will the person also be an employee?
- What actual services will they perform?
- Do the articles or by-laws restrict compensation?
- Does Ontario charity law apply?
- Does Ontario Regulation 4/01 apply?
- Is court approval required?
- What conflicts of interest exist?
- Who will approve the compensation?
- Is the compensation reasonable compared with similar work?
- Is there a written employment or services agreement?
- Has the decision been properly documented?
- Are payroll and T3010 reporting requirements being addressed?
Can a Charity Founder Be Paid? The Short Answer
Yes, it is possible for a founder to be paid for genuine work performed for a charity.
But founder status is not what determines the answer.
The important questions are whether the founder is also a director, what role the founder will perform, whether the compensation is reasonable, whether the governing documents permit the arrangement, and whether the applicable charity-law and conflict-of-interest requirements have been followed.
For an Ontario charitable corporation, I would be particularly cautious before paying someone who remains on the board.
How Falcon Law PC Can Help
Falcon Law PC assists charities, foundations, non-profit corporations, religious organizations, community organizations and other mission-driven entities with incorporation, CRA charity registration, by-law reviews, governance, director and officer issues, compensation structures, corporate changes, and ongoing compliance.
You can learn more about our non-profit and charity legal services.
If your organization is considering paying a founder, officer, director or related person, I generally recommend reviewing the individual’s legal roles and the charity’s governing documents before the compensation arrangement is approved or payments begin.
This article is intended for general informational purposes only and does not constitute legal, tax, accounting, employment, or charity-law advice. The rules applicable to compensation depend on the organization’s legal structure, province of operation, governing documents, charitable status, the role of the individual being paid, and the nature of the proposed services.