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How to Pay Your Nonprofit’s Staff

How to Pay Your Nonprofit’s Staff

Last week we looked at some key points regarding nonprofit executive compensation . This week, we want to take a closer look at best practices for paying everyone else your organization employs. Payroll for nonprofits is a complex issue already. Certain rules and exceptions apply that are different than what applies to for-profit payrolls. As if that complication isn’t bad enough, many nonprofits seem bound and determined to create their own rules and exceptions that are categorically incorrect…and destined to get them in hot water with the IRS and/or their state. Fortunately, the principles we discussed last week apply to ordinary employees, as well as executives: compensation must be reasonable, due diligence must be performed, and all decisions should be made at arms-length. If you haven’t read last week’s post , I suggest you do so before you proceed…it will help. In addition to those things, other considerations should be made. This article is going to focus on two big issues: 1) payroll classification and, 2) types of payments . Payroll classification. This is a biggie…and it gets asked about by clients on a weekly basis. That is, “Should I pay my staffers as employees or independent contractors?” 95% of the time, the answer is employee , regardless of any other extraneous information that gets tossed into the mix. It is a widely-held belief that an employer has the choice under which status to pay its workers. The most common justification is the savings the NPO will experience if it doesn’t have to cover payroll taxes. The problem is, […]

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