Employee or Independent Contractor?
Employee or Independent Contractor?

Each individual you compensate is either an employee or an independent contractor. This is a critical legal distinction, with implications for benefits, taxes, and more. Nearly all workers in our congregations are employees. An employee is entitled to employer-provided benefits (as eligible) and their wages are reported on a W-2 form. The congregation, as employer, is responsible for appropriate payroll tax withholding and remittance.

In general, independent contractor status is appropriate for those who provide services through a business (e.g., custodial services, lawn care, piano tuning) and professionals who support worship or consult on a one-time or occasional basis with no other leadership role in the congregation (e.g., itinerant musician, supply preacher, workshop presenter). Independent contractors are not entitled to benefits, receive a 1099 form (if the congregation pays them more than $600 in the calendar year), and pay self-employment taxes.

Note: Some states have put more restrictive laws in place, making it more difficult to classify a worker as an independent contractor.

The resources below will help you make the appropriate determination for those you compensate. Unless you can make a clear case for independent contractor status, based on IRS common law rules, you should consider each of your workers an employee.

UUA Resources

Additional Resources

  • This Independent Contractor or Employee? page from the IRS describes the behavioral, financial, and relationship factors to help you make the proper determination.
  • This Get the Facts on Misclassification page from the U.S. Department of Labor addresses misunderstandings that frequently result in the misclassification of employees as independent contractors.

About the Author

  • Jan is passionate about helping congregations live out their values within their walls! Her work is inspired by the mission of the UUA Office of Church Staff Finances: Guided by the values of our faith, we equip congregations for excellence as employers and their staff for financial competence and...

For more information contact comp@uua.org.

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