The Chronicle on Philanthropy had a brief article this week about the growing practice of paying volunteers: Retired People Demand Pay for Volunteering at Charities.
If you pay…doesn’t that make them employees? I thought the lack of pay was the primary distinction of a volunteer!
According to the article:
“People used to say, ‘Here I am, what do you need done?’” said Deborah Russell, director of work-force issues for AARP, in Washington. “Today’s retirees say, ‘Here’s what I do well, how can you use it, and what will you pay?’ “
Experts say that the payments are important in motivating people to stick with their volunteer roles.
This certainly plays into how we in the nonprofit world adjust to the silver tsunami and the Al Gore Population.
My HR career spans more than 30 years…11 in the financial industry and 20 in a not for profit. It has been my experience that paying volunteers can be hazardous to both the organization and to the volunteer. Hazardous to the organization becase it may be liable for state and federal penalties if it does not withhold and submit state, federal FICA and Medicare taxes on a quarterly basis and submit
W-2 forms at the end of the year. Hazardous to the volunteer because s/he may be subject to criminal penalties if s/he does not report payments received for “volunteer” work when s/he files his or her annual tax return.
There really is no such thing as a paid volunteer. Payment for services provided on a regular basis creates an employer-employee relationship as described in the IRS Guidelines.
Payment for services that are provided only occasionally and do not meet the IRS standards for employee status will likely place the individual in the category of “independent contractor”. While this would not require payment through the employee payroll or the withholding and remitting of taxes, it would require issueing a 1099 to the employee as well as to the state and federal governments if the amount paid to the individual meets or exceeds the taxable limit.
The safest practice is to pay at least the applicable minimum wage (state or federal, whichever is greater)and to pay the individual through the regular employee payroll with all appropriate taxes withheld.
Great observations, Fred.