How the Independent Contractor and Growth of the Gig Economy Benefits Nonprofits
Independent contractor, virtual assistant, freelancer, or gig worker is how many people describe their line of work these days, more so than at any other time in history. Successful businesses like Uber and Instacart even rely on independent contractors to make their business model work.
Business leaders have written numerous articles on the benefits of hiring an independent contractor versus an employee, including in Forbes Magazine, SmallBizLady’s SmallBizChat, and the American Express Business Blog. After COVID-19 shifted many to remote work, demand for independent contractors skyrocketed in almost every business sector.
PLEASE NOTE: This post is strictly informational. It does not replace nor should be construed as legal or financial advice. Review options with your lawyer and/or tax professional to ensure you are working within applicable laws.
Can the Nonprofit Sector also Benefit from the Independent Contractor model?
As with many for-profit business practices, benefits of hiring an independent contractor most definitely apply to the nonprofit sector. This includes reduction in overhead costs, particularly from payroll taxes but also from the hiring and firing expense. There are several scenarios when a nonprofit should consider hiring an Independent Contractor:
- Your organization is small but growing and may not yet have the financial means or is just “not ready” to hire a dedicated employee, either full or part time.
- You have a short-term need like developing a website or setting up new operations.
- Your organization was awarded a grant or contract that is for a specified amount of time.
- You have ongoing specialized or technical needs that are not a part of your core mission. Examples include
-
- bookkeeping
- grant administration
- website and social media management
- event planning
- IT Services
- blog and video creation
- donor database management
Of the four scenarios above, the first one is the murkiest. So, let’s take a little deeper dive there.
How do you know your organization is “ready” to hire an employee, and is it more beneficial to hire an independent contractor instead?
Generally, you are asking these questions because:
- You have reached a point in your work and organization life cycle when you are exponentially growing your service.
- Your resource and staffing limitations are preventing you from moving your vision for the organization forward.
When the above apply to you, a big benefit to hiring independent contractors is their industry experience. Often independent contractors, from Virtual Assistants to Fractional DOO’s, work with multiple nonprofits. This gives them more expertise and insight about the industry that will benefit your organization.
One of the biggest advantages of hiring an independent contractor:
The opportunity to test different possibilities before committing to a full-fledged employee for a specific job.
Testing the Possibilities
Do you need a full-time public relations or marketing coordinator? Or, is it simply someone to manage social media that you need? Is an event coordinator the answer to your problem? Will a new program manager free up resources to do more of what you need? Perhaps someone to answer phone calls and reply to emails will get you to the next level.
You can hire an independent contractor for what you think your greatest need is and see what happens. If it does not workout, you can simply choose to terminate or not to renew your contract and test something (or someone) else. Be sure to review and understand the stipulations for ending a contract before signing!
A great option for nonprofits and businesses is hiring a fractional Director of Operations or fractional Marketing Director. This can be done on a temporary or ongoing basis, depending on your needs, and can save you money while still getting the specific expertise or knowledge you need. Check out this post from the Forbes Coaches Council on the benefits of hiring a Fractional DOO/COO and determining when you need one.
The Legalities
This blog is in no way meant to suggest that I am a lawyer or tax professional. There are numerous articles about the legal classifications of an employee versus an independent contractor. The National Council of Nonprofits, Foundation Group, and Blue Avocado provide additional considerations for hiring and contracting decisions for nonprofits. I also recommend looking at the benefits of a strategic planning process prior to hiring if you have not already done so.
PLEASE NOTE: This post is strictly informational. It does not replace nor should be construed as legal or financial advice. Review options with your lawyer and/or tax professional to ensure you are working within applicable laws.
