Three Paths for Pastoral Payroll: Independent Contractor

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From MAG Booking, Ivy Sprague discusses ways to handle payroll for church pastors and in particular whether a pastor can be treated as an independent contractor.  Ivy writes:

Can your pastor be classified as an independent contractor? The answer is usually no, even though many churches do classify pastors that way. If you want to classify your pastor as an independent contractor, you need to think through your church’s answers to all these questions:

Does your pastor have a high degree of control over his or her role? Many churches think this has to do with the pastor controlling his or her own schedule, but it really has more to do with the means and methods used to accomplish their work and how the employment relationship is structured. If the pastor works in multiple settings and comes to your church to perform a ceremony or speak occasionally, then that’s an independent contractor role. If the pastor has a job description and is serving as a pastor to your congregation (even part-time), that pastor is an employee – not an independent contractor.

Does your pastor own the equipment and space used to accomplish his or her work? Your pastor probably doesn’t own your church facilities or any office space there that he or she uses. And this doesn’t mean that your pastor works from home or the local coffee shop sometimes. If the pastor is doing the majority of his or her work in your facilities, they’re an employee – not a contractor.

Is your pastor recognizing any opportunities for profit or loss? This means the pastor, in the course of his or her duties, could take on a task that puts his or her own assets at risk, but gives the opportunity for a larger gain. Independent contractors typically recognize these opportunities – employees don’t.

Do you have the right to discharge your pastor from his or her role? If you as a church can fire the pastor, that individual is normally an employee – not a contractor.

Is there an expectation of permanency in your relationship with the pastor? This doesn’t mean that your pastor hasn’t been with the church for a long time – it has more to do with the expectation of a long-term relationship. Independent contractors are typically engaged for a shorter term, and there’s an understanding that the working relationship won’t be one without a foreseeable end.

As you’ve probably realized, lots of these questions venture into some pretty gray territory – which is why having an experienced church finance partner on your side is essential….

Read the full story at Three Paths for Pastoral Payroll: Independent Contractor

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