Keeping control of your organization’s costs by having independent contractors could cost your organization a lot more if not done right.

The safest way to know whether your organization should consider having the individual(s) as employees can be resolved by filling out an SS-8 IRS form.  The forms are on line and the questions clear to understand.

Basically the questions are do you control where, when and how the person does they duties.  If you say yes to all three, then hands down they are your employees.  It gets more difficult to answer when the work for an individual is intermittent and/or temporary.  The focus still is on control.  The individual working for more than one entity, or who is compensated based on a specific product outcome, or is the individual who bears all responsibility of other hires they make and is free from direction and control of the hiring organization, is more likely not an employee.

One of the hardest areas of designation is fee for service arrangements with individuals who are paid a percentage of the fees being charged for each person seen.  If the person is practicing under the license of an organization, the individual is more likely considered to be under the control and supervision of the organization.

Health costs are making the cost of an employee much harder for an organization to support.

Make sure employees know the total costs of all insurance benefits, taxes, unemployment and workers compensation paid out by your organization in addition to their individual salary. By showing the increased costs that the organization is incurring each year, it provides for a clearer understanding of why raises are harder to obtain.

Organizations that provide staff with a clarity on costs and a compensation bonuses pool Create a pool of funds as a one time expenditure), makes it easier to control costs. Further, staff whom have the knowledge of what it truely costs to employee staff are more engaged with the organization.  An organization where staff have an understanding where the money is being spent are more committed to that organization when spending is viewed as being distributed fairly.

The change in accounting standards will cause two surprises for nonprofits.

Audit costs are likely to increase up to 20%.

Your audit will cite internal controls and other processes in your organization which it had previously ignored in prior years.

To control your audit costs, be better prepared to provide your auditor the financial material in an organized manner. Your organization will be billed for each minute. Your mess is billable for them and they are not required to tell you how to decrease your costs.

Second, make sure more employees are trained on your internal control processes. The more you can document the checks and balances the better for management and the board to show their fiduciary responsibility.

An Association is usually incorporated as a 501 (c) 6 organization. It works on behalf of its members. The strength of an Association is based on its membership. The larger the membership, the more success the Association will have in producing greater results. A nonprofit or individual should pay a membership to join an Association if there are clear and measurable benefits to being a member.

The most simple measure is, “Will my organization save money or obtain additional funds by the actions of the Association?” Group purchasing is the quickest and easiest way to see results immediately. These actions create more funds by decreasing costs.

Property insurance, health insurance, dental insurance, visioin insurance, utilities, billing services, retirement plans, human resource services, accounting services, consulting services, development services, office supplies, security, bottled water, food, equipment, web services, information technology services, banking services, audit services, construction, and employment assistance programs are just a few examples where group purchasing can decrease costs.

The other part of an Association’s effort is lobbying and clearly educating elected officials. A key role they play is providing a clear voice on the economic impact of their member organizations and the criticial areas of concerns.

So take advantage of Associations where it makes sense. Make sure you never pay more than it costs your local, state or federal government for a service or product.

The wage and household budget examples below have been created for your organization to better understand the pressures an employee will have in considering the salary that your organization offers for a position.

SAMPLE WAGE CHART

The pressure to earn a living wage gets harder each year for employees and is mostly dependent on the housing costs of an employee.

Sample Employee Household Budgets
(What does an empoyee’s salary buy per month?)

What is your organization doing to address the housing or living wage problem for your employees? Check out this post for more information.