Employer or Contractor?

This question comes up way too often. Churches want to classify people as contractors when they are really employees. I understand that it is a pain to get all the tax forms, set them up in the payroll system, and have the extra FICA expense. But there is not legal way around this.

A church contacted me about hiring an intern for a few weeks. The pastor thought it would be easy – bring the young man on board, pay him a flat fee for his work, and then he’d leave. Unfortunately, pastors and other church leaders do not fully comprehend personnel law and they can get the church in trouble.

Here is the IRS page addressing this.

Here is the page from the Department of Labor.

Each of them have lots of information and linked pages. Here is the key info from the IRS website:

  • The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done. Small businesses should consider all evidence of the degree of control and independence in the employer/worker relationship. Whether a worker is an independent contractor or employee depends on the facts in each situation.

The key issue is control. Does the employer control when, where, how, with what, why, etc. a person is doing their work? That is an employer/employee relationship. Or, does the employer give instructions as to what is needed and then receives a completed product at a future date? That is an employer/contractor relationship. For example: a church bookkeeper with an office in the church using church computer is an employee while the church’s auditor is a contractor.

There are some nuances to churches in particular.

  • Guest preachers or speakers are considered to be independent contractors because they created their content and the church didn’t dictate what they would say. That is also true for musicians who perform their own original music.
  • Musicians who play or sing pieces that others wrote and which the church asked them to play or sing are considered church employees. That is because the church controlled the time, place, instrument, and choice of music. The American Guild of Organists has an article explaining to their members that in most cases church organists (and paid choir members) are employees.

My request is for churches to be completely honest and aboveboard. Classify people as employees when in doubt. You’ll be able to sleep at night better.

Lead On!


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