Should A Church Treat All Staff The Same - As Employees or Self-Employed?

Nonprofit and Church Legal Trends - Free Edition - November December 2008 (free edition)

Should a church with three full-time pastors, five full-time lay employees, and two part-time custodians treat all these workers as employees or as self-employed by our church treasurer?

Here is what the IRS says in Publication 15:

“To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. All evidence of control and independence must be considered. In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship : of the parties. These facts are discussed below.

(1) Behavioral control

Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired, including the type and degree of instructions the business gives the worker. An employee is generally subject to the business' instructions about when, where, and how to work.

(2) Financial control

Facts that show whether the business has a right to control the business aspects of the worker's job, and

(3) Type of relationship

Facts that show the parties' type of relationship may include:

• Written contracts describing the relationship the parties intended to create.
• Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.
• The permanency of the relationship. If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship.