Once you have found a new team member, you need to think about the kind of arrangements you want to make. You will want to contract them – but how? Are you ready for having the responsibility for an employee? Is this what is needed for the kind of relationship you want to enter into? What would a good employer do? Or: what is proper in contracting work?
Two main options
In order to know what the best way to contract is, you must first understand the differences between different ways of hiring someone to work for you. Basically, you can choose between being someone’s employer or being someone’s commissioner. You give them either a job or an assignment. The difference may not always be very clear in the day-to-day implementation of certain tasks. But at the back end there is a huge difference.
What difference does it make?
If you hire an independent contractor for an assignment, this person is responsible for their own taxes, pension scheme, equipment, etc. They make their own schedule and charge you for time spent. If they are ill, they don’t work for you and don’t charge you. If they want to go on annual leave for three months, they simply stop working for you. There is a certain level of freedom and flexibility that comes with them being responsible for themselves.
If you hire someone as your employee, on the other hand, you bear employer’s responsibilities. You are responsible for setting up a good workplace. You will organize the monthly paychecks including payment of taxes and payments on the pension scheme and social insurance. You provide equipment and relevant other tools for work. You allow someone to go on leave and you pay their salary during that time, too. You may allow someone to join a course – and pay for it. And so on.
You see, as employer you bear a variety of responsibilities towards the persons in your care as employees. At the same time, of course you bear some responsibilities toward independent contractors, too. If they come to work in your office, it is your responsibility that your office is a safe and secure place to work. If you send them on a business trip, you may have to make sure they have travel insurance, etc. So, when it comes to the day-to-day practice of work from the office, there may not be much difference between your employees and your contractors.
How to differentiate? Legal aspects
So how to choose between one form or the other? Employees are often considered the ‘weaker’ party in the employment contract. Therefore, the law protects them through providing them with rights that match your obligations, such as the right to paid leave, to normal working hours, etc. etc. In order to reach ‘employee status’ and be able to use those rights, the contracted situation must meet certain criteria.
There are three main legal criteria to distinguish between employees and contractors. If you check the arrangements as you want to make them against these criteria you have an indication of what type of contract suits the arrangements best. (Check out my free Checklist Contracting here to learn more). This can help you understand and decide what is correct in legal terms.
How to differentiate? Moral aspects
However, the law isn’t everything. There is also your moral compass. It may be possible to adjust your arrangements so that you can avoid becoming someone’s employer with all the responsibilities that entails. But that may not be the right thing to do. It may not be right for the person, who may be looking for the security of a job. Or who may be looking for the possibility to save for a pension through having a job.
And it may not be right for your organization. As a nonprofit, you are working for a greater good in society, whatever your focus area is. You are taking social responsibility toward your mission and vision. So, it may not make sense to shy away from taking social responsibility towards people you want to work with. This may harm your public image. And it may also make it difficult for you to inspire team spirit and build stable operations, if you are not offering people any certainties.
But what if …?
Maybe you feel the arrangements require an employee and are contra-indicative for an independent contractor. But you are a bit scared of taking the jump to becoming an employer. You may not feel knowledgeable enough about what that means. And it seems like too big a risk. What if you make a mistake? What if something goes wrong? In this case, you could try to get someone on loan who is already employee at another organization. They would remain that other organization’s employee but work part of the time with you. And you compensate their organization for that time.
Maybe the person has a part time contract and would like to work more. Maybe their employer does not have enough (interesting) work for them. Maybe you are looking to develop a partnership with that other organization. There are many reasons why this may be mutually advantageous for the other organization, the person concerned and you and your organization.
How to find such opportunity
Such opportunities are most usually found through the other organization who may already be (looking to be) your partner. Or through a person who is looking to expand their job. But you might also create such opportunity yourself. If you need to hire a part time employee, you could also try to find another organization facing the same challenge. So that you can address it together, learn and become stronger in this area.
My two top tips for you:
- Be aware that the legal criteria need to be applied to the situation. What is written in the contract may be clear in one direction, but the reality is what counts. Also in the eye of the law.
- Always ask the person you want to hire what their needs and desires are. You may think you know, but never assume – just ask!
Have you seen my checklists?
If you are interested in learning more about the legal aspects in differentiating between employees and contractors, get my free Contracting Checklist here.
If you are interested in organizing your staff files, you can get my free Staff File Completeness Checklist here.
Want to know more and ask questions?
If you want to discuss this more – jump into the Facebook group and get input from a wide range of peers and from myself!
Here is how you can join my free Facebook group
You can join my free Facebook group how to become a professional and resilient nonprofit with Suzanne Bakker here. In this group we will create a safe space for open exchange and discussion on potentially sensitive topics like boards, nonprofit management, fundraising, etc.