At some point, your organization will need outside help for tasks that are well beyond the capabilities of the volunteer pool. At this stage you will have to decide whether to employ people or hire them as independent contractors. There are advantages and disadvantages to either option, and there are also ethical questions you may have to consider. Businesses in the for-profit sector also face these questions, but the difference lies in how and why you make these decisions.

Staff as Independent Contractors

An independent contractor is essentially a private business of one person. By signing a legally binding contract, he agrees to provide a specific service to your organization for a set fee.

You have probably already hired independent contractors and never thought about them as such. The electrician who rewired an office and the webmaster who maintains your website are examples of independent contractors you may never have realized you had. They agreed to perform a service, you paid them, and that was the end of the story. The individuals may have been employed by a company — perhaps an Internet service provider or an electrical service company — but in their working relation with your organization, they were contractors.

This situation is far different from contracting with someone to handle a task on an ongoing basis. The advantage of such an arrangement for the contractor is the relative freedom it offers. He is only committed to a set period or to complete a specific task.

The contractor rarely receives benefits such as health insurance, is often responsible for his own taxes, and is not eligible for unemployment compensation. This arrangement can be a major disadvantage for the contractor, but it can be an advantage for the organization that hires him. For this reason, it is a potential source of conflict. Many nonprofits need to address the moral dilemma of securing the long-term services of an independent contractor for these very reasons.

Staff as Employees

The other main option is to hire an individual as an employee following a process that is identical to that in the for-profit world. As an employer, the organization becomes responsible for payroll withholdings for taxes and social security and can offer health insurance, if that is an option. Federal and state labor laws immediately cover the new employee; these laws exist as a baseline for issues from minimum wages to required hours to holidays.

A negotiated contract can outline all the particulars and responsibilities of both the employee and the organization. Hiring employees inevitably means more complex bookkeeping, so expect the need for a competent, professional bookkeeper.