Know What To Do When Hiring Your First Staff Member
By Christine Bove
It’s very exciting when your church has grown to a new level of capacity that you can now hire staff members.
It’s a momentous occasion and is a tangible sign of God’s active work in growing your ministry!
There are a lot of questions circling around how to hire your first staff member for your church and all of the processes involved in hiring.
So how do you hire for a church or ministry? What are the steps and processes for hiring for churches? And how does a church stay IRS compliant when hiring?
Below are a few practical first steps for hiring.
4 Questions to answer before hiring your first staff member
Who is handling the church’s payroll?
In essence, who will oversee the whole on-boarding process and handle appropriate filings? Who will collect the information from the staff member(s)?
This will be the person responsible for filing the church’s employee returns with the government as well as oversee the taxes that need to be taken out.
It will be helpful to designate someone for this role since there are a lot of factors involved.
While this may be intimidating, you don’t have to know everything to start. There is training you can go through to be better educated in the world of church payroll and human resources.
If you want to train yourself or someone else for this, we offer an online program called StartCHURCH University that walks through church compliance with payroll and more. It’s designed to be done on your own time at your own pace, and it walks your through everything you need to know to hire your first employee.
Forms
The two main forms for employment will be the Form W-4 and the Form W-9.
- Form W-4 is used for employees who will work consistently for the church and who are considered staff.
- Form W-9 is used for contract workers hired out to complete certain tasks for the church.
It’s important you file your employee(s) under the right category to stay in IRS compliance. We’ll expand more on this topic in a moment.
Payment schedule
As an official employer now, you will want to schedule a consistent time of pay for your employee(s).
Typically, there are two options:
- Bi-weekly, and paid on a consistent day
- Or the 15th and 30th of every month
Whichever you choose, just make sure it’s consistent. And it really helps to collect the direct deposit information of your employees so you can directly deposit the money into their accounts, also ensuring consistency.
Call us at 877-494-4655 for a free Direct Deposit Authorization form.
Filing returns
As a church with paid employees, you will want to file these forms for your return to the IRS:
- W-2
- W-3
- 1099–MISC
- Form 1096
- and 941
These return forms should be completed based off the information provided on the W-4 or W-9. You can find more information on how to file those through our StartCHURCH University online program and through the IRS website.
IRS compliance
We cannot express enough the importance of staying in compliance by filing correctly. The federal law requires full compliance to the payroll tax reporting laws, even if you are a church or nonprofit ministry.
While this isn’t to intimidate you, there are many cases of churches who did not file the correct way or hire in IRS compliance with their employees and it became very problematic.
There are penalties for noncompliance with churches or ministries not filing their employee(s) correctly on their documentation to the government. Penalties can cover various extensive fines, to ultimately the IRS conducting an investigation of 10 years worth of going through your church’s books.
The Federal government has already determined what specifications are for filing your employees as a church. You can find those details in IRS Publication 15.
Under the IRS publication, there are three main guidelines for determining what kind of an employee one is within the church:
- Behavioral Expectations
- Financial Expectations
- Relationship of the Parties
Contract
When an individual is under contract with the church, there are three primary characteristics:
Behavioral Expectations: For a contract worker, the individual decides how to perform their own duties, not the entity.
Financial Expectations: For a contract worker, they determine the business aspects of the job. They also decide how and when to perform the job and if they want to take on other jobs from other places that are similar. This is based off of the job versus getting paid hourly.
Relationship of the Parties: This comes down to “how essential is this person/role to the operations of the church?” For a contract worker, they are hired based on specific projects needed at various points, not someone who is a primary contributor to the daily operations of the church or organization.
Example: New Light Church is starting their new series called “Life Lessons from Movies.”
For this specific series, they wanted to update the looks of their church lobby to make it more reflective of the movies they were covering. They don’t have staff members who would be able to pull off their vision, so they hired individuals and small companies to paint and decorate the lobby.
The church gave the individuals the idea and the vision and let them know that the church will reimburse them for any expenses they accrued along with their payment for the job to be done.
New Light Church only needed those individuals for the series, so they hired them as contract workers, not employees. The contract workers also were working on their own schedule, time, resources, and charged the church a flat rate. This would be contract work.
Employee
As an actual employee of a church, there are some major key differences than that of someone under contract.
Behavioral Expectations: The church dictates when and how to perform their duties, not the individual. This even includes individuals who are part-time or are working for little money. They are still considered an employee if the entity decides what the job is, what the duties are, and what the time frame is for performing those duties.
Financial Expectations: The church controls all of the business aspects of the person’s job. This also is typically a salaried position or paid hourly, not paid by job finished.
Relationship of the Parties: If the individual is performing tasks and duties that are essential to the operations of the church and are paid for it, then they are considered an employee.
Example: Pastor Caroline is the Executive Pastor for Freedom Discovery Church. She is over all of the church’s operations as well as HR and staff development. She is part-time at the church and works another part-time job in retail. Her role is crucial for the overall effectiveness of the church and has a set schedule, so she is considered an employee, even though she is only part-time.
Staying in compliance
While payroll and compliance can be very intimidating and overwhelming at first, once you know what is expected from churches with paid staff for the IRS, it becomes easier to understand and to operate in.
The key is to be trained and to know what is expected.
Along with our online course, we also have a couple of suites that will help keep your church maintain compliance: the Documents Suite and the Compliance Suite.
The forms you need for hiring and hiring compliance will be in those suites.
We love coming alongside our pastors and making sure they are well taken care of and don’t miss anything.
If you are unsure if you are in IRS compliance or just have general questions about payroll, give us a call at 877-494-4655 .