Can An Executive Director Of A Nonprofit Be An Independent Contractor?

EMPLOYMENT PERSONAL & FAMILY TAX, LICENSES & PERMITS WILLS & TRUSTS


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Hiring an executive director is an important action for any kind of expanding nonprofit. In enhancement to valuable considerations in finding a good match for your company, you must additionally take into consideration the function and duties of the board of directors in picking an executive director. Furthermore, both the federal and also state government carry out rules on compensation of nonprofit employees.

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Before beginning the process of hiring an executive director for your nonprofit, the board should develop a hiring strategy. For a place such as an executive director, it is proper for the board of directors to be associated in the decision. However before, the board might likewise decide to create a search committee composed of various other volunteers in the organization, or hire a hiring manager to recruit the appropriate perkid for the organization. The strategy will certainly established by the wanted time period and also resources obtainable to your organization.


Members of the board of directors involved in the hiring procedure need to store in mind their legal responsibilities to preserve their duty of loyalty and also care to the nonprofit and to stop disputes of interemainder. The board members should constantly act in the finest interest of the nonprofit throughout the hiring process. Additional, members have to disclose any kind of potential financial conflicts of interemainder that might aclimb, such as a family member being considered for the executive director position. Typically speaking, the executive director have to not likewise be a board member, to stop any kind of appearance of conflicts of interest.

See more: Benefit Corporation Vs Nonprofit And A Mutual, What Is A Nonprofit Public Benefit Corporation


The Internal Revenue Service gives that nonrevenues may not pay employees more than "reasonable compensation." To determine a reasonable salary, the board need to think about the employee"s background and also endure, the dimension of the service, the economic problems, the amount phelp by comparable organizations in the exact same location to executive directors and also comparable factors. When evaluating compensation, you need to likewise think about other forms of compensation, such as contributions to profit-sharing plans, use of the organization"s infrastructure, or rent. Organizations that are well-known by the IRS as 501(c)(3) nonprofits can lose if even more than reasonable compensation is passist to to the executive director.


In addition to considerations about reasonable compensation, you must think about state and also federal wage and also hour considerations as soon as hiring brand-new employees. For example, some nonrevenues might attempt to save money by hiring the executive director as an independent contractor rather of an employee, however this is most likely in violation of the Federal Fair Labor Standards Act. You must consult your state"s wage and hour department to determine if tright here are demands for compensation for training, travel time or overtime.


Elizabeth Rayne earned her J.D. from Penn State College and has actually been practicing legislation considering that 2009, advising clients on worries varying from employment legislation to nonprofit administration. For 2 years, she offered as a contributing editor for the "Vermont Environpsychological Monitor."


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BUSINESS EMPLOYMENT PERSONAL & FAMILY TAX, LICENSES & PERMITS WILLS & TRUSTS