Category: Church Staff

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Should You Pay Your New Church Staff Member as an Employee or as a 1099 Independent Contractor?

Church Staff 1099

You’re ready to bring on a new church staff member. Only the question you really need to know the answer to is how you are going to pay them. Should you classify them as an employee (who receives a traditional W2) or as an independent contractor (who receives a 1099)? 

Employee Vs. Independent Contractor: What’s the Difference and Does It Matter? 

One of the most common questions we get asked is whether to classify someone as a 1099 Independent Contractor. Usually when a church contacts us and uses the word “stipend” in a conversation about compensation, we know that we’re going to have a discussion about Independent Contractors vs. Employees.  

First let’s define the terms.  

An employee is someone who works directly for an employer and receives a W2 each year. Being an employee may also entitle the individual to other benefits like health care coverage, FMLA and unemployment benefits. The employer is responsible for withholding and filing taxes on behalf of the employee. 

An independent contractor, in the eyes of the government, is self-employed. Self-employed individuals are not eligible for things like FMLA, ADA or unemployment. The contractor is responsible for all their own taxes; therefore, nothing is withheld from their paycheck. An employer who utilizes the skills of an independent contractor, just pays the contractor and provides him or her with a 1099 each year.  

As you can see, paying someone as a contractor is appealing to employers because the employer is not responsible for withholdings, insurance, etc.  

Can I Just Pay My Church Staff as Independent Contractors? 

The IRS is a bit vague about the specific distinctions between the two categories. They give churches and nonprofits a lot of leeway in determining organizational structure; however, the IRS does provide some guidelines to help make that determination.  

Making the right determination is important because there are penalties for misclassifying an employee. The penalties vary on a case-by-case basis from monetary fines to even criminal punishment.  

The full list of the IRS criteria on whether or not someone should receive a 1099 can be found here.  This can be a little difficult to decipher if you’re not a CPA or an attorney, but here are some guidelines to help you determine how to classify your next hire.  

There are three phrases you need to keep in mind to help you make a wise determination: 

  • Time Control 
  • Tools and Resources 
  • Expected Longevity of Relationship 

Let’s break these down. 

Do You Exercise TIME CONTROL Over the Person? 

If the person who’s getting compensated from your ministry is expected to put in a specific number of hours or work at certain times, that means you’re exhibiting time control over that person. You’re telling them when to do the job or how long it should take. This also comes into play if you give the individual a specific number of hours they are to work for a given time period. 

If you have time control over the person, more than likely they should be classified as an employee for your organization. 

We find a lot of churches want to classify musicians as 1099, mostly for payroll simplicity. One fact to consider specifically is that you probably tell the musicians that they need to be at the church on Sunday mornings. This is an example of exhibiting time control. We’ll return to this specific example in a moment.  

Do You Give Them the TOOLS & RESOURCES to Do Their Job? 

If the person working for your ministry is using your tools and resources to complete their task, more than likely they’ll need to be classified as an employee. This could be someone using a church computer for bookkeeping, someone designing and printing church bulletins for Sunday morning or your marketing, social media or video people using a church computer to get things posted. If you are paying this person and they are using your equipment, they would most likely be considered an employee and not an independent contractor. 

Another instance would be your cleaning crew using the church’s vacuums, mops, brooms, etc.  If they are using the church’s equipment to complete the task, they need to be classified as an employee. 

Or consider church musicians. If you are paying your church musicians and they are using the church’s sound system (equipment) or playing the church’s piano or drumset (equipment), they might need to be classified as an employee of the church. 

Is There a LONG-TERM EXPECTATION of Relationship? 

We find that some churches want to pay their pastors as 1099 Independent Contractors.  Many do this because they misinterpret the self-employed dual status of pastors.  

According to the IRS, pastors are considered self-employed, but only for SECA (Medicare and Social Security), not their employment status. Yes, we know this is confusing.  

The point here, however, is that if there is an expectation of a long-term relationship between the individual and the organization, a person should most likely be classified as an employee. 

But a Church Musician, Really? 

Back to our example of how to classify church musicians. This is one of those areas that even the IRS isn’t very clear about in their determination. If a musician plays for several different organizations and they aren’t “required” to be at your church, they would most likely be considered an independent contractor. In any case, the situation needs to be analyzed carefully and it’s best to document whatever decision you make. The documentation won’t change the IRS decision if your church is ever audited, but you will at least have a basis to share why the specific decision was made. 

If you are confused about how to handle any particular situation, we recommend getting some paid legal advice.  This is simply a short overview for informational purposes only and it definitely doesn’t encompass all situations.

At the end of the day, if you question whether or not a person should be classified as an employee or independent contractor, it is best to err on the side of paying someone as an employee. The penalties for misclassification of a person far outweigh any savings you may gain by trying to make someone a contractor. 

Does Hiring a Person Have to Be Complicated? 

Nope. If you’re ready to eliminate the confusion and guesswork that comes with managing payroll for your church, we’re here to help! We’ll make sure that all your withholdings are set up correctly, we’ll file your paperwork and ensure that the pastor’s compensation is handled correctly. Save yourself valuable time and a lot of headache by partnering with us, instead of trying to navigate things on your own. Give us a call or apply today to get started!  

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Growing Your Church Staff: Should You Hire or Rely on Volunteers?

Small Churches With Big Vision Can Have Big Impact.

But it takes more than one person to bring that vision to life.

Perhaps you are a visionary pastor. Your greatest desire is to see more lives changed by the power of the gospel. You went into ministry because you had a God-given calling and a passion for people. You have a vision to see God use your church to accomplish His mission. But there is only so much you can do alone.

Too many pastors and church planters try to save money by trying to do everything themselves. But it’s too much. And it’s not the most effective way to accomplish the vision. And in the end it can end up costing you more time, money, and diminishing your impact.

Big impact can only happen when a strong team is in place to execute the vision. And the challenge for pastors is figuring out how to build that team.

Should Your Church Staff be Made Up of Volunteers or Employees?

Perhaps the scenario we see most often in small and growing churches is the all-volunteer church staff. If you are in the early stages of planting a church, you simply may not have the funds to hire any help. In this case, you must rely on a team of volunteers to make things happen. This is sustainable for a season.

But eventually there will come a point where the current level of growth, effort and impact of your church will not sustainable through the efforts of volunteers alone. Either you, and/or your volunteer team will burn out. And the last thing your church needs is for you to get burned out and quit the ministry. We’ve seen this happen way too many times. 

Before you ever reach this point, you and your leadership team need to think hard about what type of church you want to be and the long-term investment that will be required to accomplish the vision of the church. You will need to determine what kind of church you want to be, and which leadership structure is right for your church.

But before we dig into the details of how to build your church staff, we need to address a common misnomer.

Cheap Doesn’t Equal Stewardship

It can be tempting to continue to rely on a team of volunteers to execute the mission of the church. After all, this feels familiar and it is obviously the cheapest option. Isn’t cheap the same thing as good stewardship?

Absolutely not. I’m not sure where these two ideas got intertwined. Just because something is cheap, doesn’t guarantee that it is the most cost-effective, valuable or the right choice for long-term sustainability and health. Cheap doesn’t always equal good stewardship. 

Building an All-Volunteer Staff

While volunteers are a vital part of the functioning of every church organization, there are some challenges that come with relying solely on volunteers to accomplish key ministry tasks:

  • Your volunteer may be willing, but not in the right position. I can’t tell you how many times we’ve heard stories about volunteers who were very willing to serve in a role, yet they were not suited or qualified for the given role. What’s more, the under-qualified individual may prevent the right individual from serving where they are most gifted.  

    This can lead to an uncomfortable situation if the volunteer needs to be removed from the role. Often pastors will avoid this confrontation and just work around the situation. This creates more work for everyone involved and is not healthy for the entire organization.
  • Volunteer responsibilities need to be managed differently. The Fair Labor Standards Act (FLSA) has specific guidelines regarding the differences between employees and volunteers. While the guidelines for non-profit organizations can be interpreted broadly, this is something to keep in mind. Essentially the more say you have in what and how a person performs specific tasks, the more likely they are to be seen as an employee in the eyes of the law.
  • You are relying on their time commitment. Often, the volunteer’s schedule will dictate when things can get done. It is easy for the needs of the church to get put on the back burner. Things that are critical to ministry growth and success might not get done.

The biggest challenge to the all-volunteer staff approach is that the impact potential of the church gets limited. While we have seen a few churches sustain health and growth with only a team of volunteers, most churches eventually plateau (or begin to decline) unless they choose to invest in church staff. 

Is it Time to Hire or Outsource?

A great first step to increasing the impact of your church is to hire part-time help or outsource time-consuming tasks.

Think through how you currently spend the hours in your week. According to the Harvard Business Review, you can free up to 20% of your day by either eliminating or delegating unimportant and time-consuming tasks. What kind of impact could your church have when you are able to focus more on the mission and less on the administrative details?

Some of the most common tasks to outsource include:

What Happens Next?

We can’t tell you specifically what role you should hire for first and what you should prioritize because this is unique to each church. It depends on the specific giftings and weaknesses of the lead pastor, along with the vision and goals of the church. But here are some of the most common church staff roles that help churches make big impact:

  • Associate Pastor and/or Executive Pastor
  • Children’s Minister
  • Student Pastor
  • Administrative Assistant
  • Groups/Equipping Coordinator
  • Worship Pastor
  • Missions/Outreach Coordinator

We recommend sitting down with your core leadership team to dream together about the vision of your church and then sketch out a strategic plan and timelines to bring on paid support to help accomplish this vision. This will not happen overnight, but through setting goals, making informed decisions based on accurate numbers, prayerfully pursuing the vision God has given your church, and building a healthy leadership team, you will move towards big impact much more quickly.

Are you a small church who wants to have big impact? Give us a call so we can chat about how we can partner with you to grow your reach and impact. 

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Before You Hire Your First Church Staff Member…Do This

If you are the pastor of a small church, you probably already know that there is a limit to what one staff member can accomplish for a church (at least without eventually burning out).

You’ve realized that there is a finite amount of time, but more tasks that need to be accomplished than can fit into that finite amount of time. Eventually there will come a point – if it hasn’t already – where you will need to consider whether to bring on additional help.

Many small churches and church plants will first try to make do with volunteer staff, but there are additional challenges that come with relying on volunteer staff for key ministry functions.

If you truly want to be a church that flourishes and experiences long-term health and impact, you will at some point need to invest in paid help. But before you bring on an additional paid staff member, there are a few things you need to consider:

1. Make sure you hire a church staff member for the right reasons  

Hiring that first employee is something that needs to be done with some forethought.

I’ve met several pastors that hired their first employee and in hindsight realized they did it for the wrong reasons. Yes, there probably was more work than one person could handle, but their motivation for hiring someone was really the belief that hiring an employee would mean that the church plant had somehow now “made it”.

In reality, when not done right, hiring that first employee can actually be a detriment to the church. After all, there are a whole new set of responsibilities and requirements that need to be considered once your church is designated an employer (more on this in a moment).

2. Make sure you hire the right church staff person for the right role

I’m sure you already know this, but never hire someone simply because you are desperate, and they are available. Conversely, don’t hire someone just because they are a good friend or a “good person”.

In the words of Jim Collins, “Leaders of companies that go from good to great start with getting the right people on the bus…and the right people in the right seats.”

The same is true for your church. If someone is not the right fit for the church or for a specific position, it can cause a great deal of harm. Before you hire someone, first think through the needs of the church. Then consider your responsibilities, giftings and skillset. Ask yourself:

  • What is currently missing/lacking?
  • What responsibilities should I offload?
  • Could I effectively solve these problem areas with volunteer help or by outsourcing? Or should I bring someone on in a paid capacity?
  • What are my areas of weakness and how could an additional staff person offset this?

If you determine that your church would be best served by an additional paid staff person, consider what characteristics would complement your gifts and personality traits. For example, if you are a visionary/dreamer, consider bringing on someone who is more detailed-oriented and gifted at turning dreams into executable plans.

3. Recognize that you will now also be a boss

Chances are you went into ministry because your life was changed by the gospel. You expected that life in ministry would involve preaching the word, discipling and encouraging others in their faith, and spreading the message of Jesus with your community.

My guess is that you didn’t go into ministry with the expectation that you would be operating the equivalent of a small business. And yet, as a church grows, the administrative responsibilities increase as well. Being a lead pastor involves not just shepherding people, but also leading the organization. When you hire additional staff, you become both a pastor and a boss.

In some cases, pastors specifically hire someone to oversee all the administrative areas of the church. They assume that by hiring an executive pastor, they will be able to solely focus on ministry.

However, as the lead pastor, you need to be aware of the health of your organization. Even if you aren’t managing the day-to-day details, you still need to have a pulse on how the organization is doing. And you are still ultimately the person that sets the vision for your church and that all other staff members answer to.

Besides, as a non-profit organization, there will ultimately be one person the IRS or state and local government looks to as the “manager” of the organization. As much as many lead pastors try to say they’ve delegated this role to someone else, at the end of the day it falls on them.

My encouragement to you is to not let this new role scare you. View it as an opportunity to grow in your skills as a leader and a disciple-maker.

4. Learn to lead your church staff team well

Even if you hire the right person for the right role, it does not guarantee ministry health and success. You will need to grow in how you lead and communicate with your team.

The moment you hire someone else, the structure of the organization changes. How you operate, make decisions and structure your day will need to change.

You will need to provide your staff members with consistent, intentional communication. This goes beyond just talking about job responsibilities and assigning tasks, but an ongoing dialogue that includes expectations and feedback.

Church staff check-ins

Set up a time to have a routine, intentional chat with each of your employees. In our company, I push to have a weekly “check-in” chat with every employee. Usually it only lasts 10-20 minutes, but these chats allow me to maintain the pulse of our organization. I get to know what’s going on personally with each person, while also keeping a handle on their workload and how they are doing. 

Church staff performance reviews

Secondly, you should have routine performance reviews. This is an area where many churches see problems arise. Let me describe a common scenario:

You hire a new staff member who excels at their job. Because they are a go-getter, as time goes on, they take on many additional responsibilities. As a boss, you are excited because it keeps more tasks off your plate.

Months go on and, because the work just keeps getting done, you never take the time to revisit the scope of responsibilities or hold a job performance review with the person.

Sounds great right?

It is. Until there is a problem.

I’ve seen things go poorly for churches in this situation several times. Either the staff member eventually burns out, or they begin to lead people toward a different vision. Instead of moving towards a united church vision under the leadership of the senior pastor, they end up sowing seeds of discord because the pastor and staff member are no longer on the same page.

Without consistent feedback, vision casting and dialogue with you, your staff members will eventually develop their own vision of where they think things need to go.

To grow a healthy church, you need a healthy leadership team pursuing the same goals. And a healthy team begins with how you lead your team.

5. Understand any new legal requirements and filings your church may be responsible for now that you have a church staff

In most, if not every situation, you as pastor are a “dual-status” employee. This means that you are considered a church employee for federal withholdings; but considered self-employed for SECA (Social Security and Medicare) withholdings.

Since you are already on the payroll, your church should already be filing proper documentation with state and federal authorities. However, if your church has not yet set up proper documentation because you’re the only person on staff, you will need to make sure you take care of all legal obligations before bringing on any additional staff members.

At a minimum, you should be submitting monthly or quarterly forms that detail payroll information for all paid staff members. This requirement starts the day your church begins compensating a person in an employment relationship.

NOTE: Before we move on, please know that it is NOT OKAY to circumvent filing payroll by paying someone as an independent contractor. The IRS has very clear guidelines and a person must meet specific criteria to qualify getting paid in this manner. Many churches mess up in this area of payroll. We don’t want you to get flagged by the IRS for mishandling payroll. 

Conclusion

We believe that churches are healthier and more effective when they have a strong leadership team. And a strong leadership team is made possible when your church is able to hire additional staff. 

If you’re concerned about managing the records and legal requirements as an employer, consider using our Simplify Payroll system. We’ll take care of all your filings and paperwork, so you never have to worry about doing it wrong. Our goal is to break down all the barriers that prevent pastors and churches from thriving. 

Bringing on staff members is an entirely new level of ministry that needs to be handled with forethought and planning. But when done well, hiring that next staff member will enable your church to impact more lives, while keeping you from burning yourself and your family out.


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The Real Cost of Free

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This post originally appeared on our previous website at AxessNetwork.com, https://www.axessnetwork.com/blog/2011/08/11/the-real-cost-of-free/

One of the greatest fallacies in our culture is the perception of ‘free’ when it comes to church help. That simple word sounds so good to people, yet few realize that it is actually a misnomer. There really is nothing free. (Except salvation through Jesus Christ, but even that cost Jesus his life.)

Every time something is offered for free, someone, somewhere, somehow had to pay for it.

Many churches are operating under the assumption that their volunteers are free labor. The truth is that the free labor comes at a cost. While it may not cost in dollars directly, the intrinsic costs of volunteer labor can be substantial. Let’s look at a few examples.

If you have a volunteer that agrees to fill a need in your church that is awesome. But what if another need comes up; do you have a volunteer base that can pick up the slack? What if the first volunteer would be the best person for the new job, yet they are stuck in their current position and have no more time to give? Now what does that volunteer cost you? On the opposite side, one instance we’ve all dealt with is what if that volunteer likes the position they are in and think they are doing fine but they are not good at it? How do you tactfully tell them the truth?

Let’s say you farm out your churches website to a volunteer to design. Sounds great right? Well there are some additional costs involved in a website. In order to have a public website you must have a domain name and hosting account. Both these items will cost money. Let’s just say that you choose the cheapest domain registrar and hosting company. Your volunteer designed the site for free and it is now live. Low cost, inexpensive way to get a web presence right.

Wrong.

While it is true there are many discount web services out there, they relative cost is actually very high. This cost often comes in lack of service, lack of availability and flexibility and their template is plagued with ads. We haven’t even gotten to the user experience when they visit your website. Since you were cheap and went the inexpensive route you now have a website with low bandwidth meaning your pages load slowly and the user doesn’t get a good experience. The average user visit to a website is 7 seconds. If your page isn’t even loaded by then, the user is long gone never to return AND they have formed a perception about your church.

More labor talks. Let’s say you have some knowledgeable people in your church and you decide to have a Saturday work day to renovate some rooms. Great, skilled labor is expensive and keeping the work in house saves money right?

We met with a church that built their own building. Well, they had the shell built professionally but they finished out the inside. Only problem was that the pastor, who was in charge of design, missed the first work day. Another person stepped in and decided they could fit extra classrooms if they reduced one foot from all the rest. More room, Great! Only problem was that now none of rooms are adequate to fit the average size of their small groups. What seemed like a great idea at the time and may not have been given much thought is now coming back to bite them and they are regretting that decision.

Volunteer quality. We all know that there are plenty of people ready and willing to help their church. After all, we are called to be servants right? However, what happens when we have a person ready and willing, but unqualified to fulfill the task? What if they are adequately qualified, but their tastes are different than that of your congregation? What if they cannot meet the requirements but they are trying their best? How difficult is it for most people to confront another and tell them they are not doing something right? What if that person’s husband or wife was a key leader in the church? Now how much did that decision cost?

I have listed all these things in a way which I realize is very cynical. In many ways, I was sarcastic and brash. However, every scenario is real and something we have dealt with in one church or another. Here is our suggestion.

Take some time to analyze what areas of your church you are willing to use volunteer labor and then allocate the others to professionals. While on the surface, free sounds good, there are many times where free is actually more expensive than the alternative.

What is the value of the perception and image of your church in the community? Is it low enough to rely on free to maintain it?