Nonprofits face a number of significant challenges in becoming and remaining stable organizations. A lot of hard work goes into making a nonprofit organization run smoothly, and a simple mistake can mean a huge setback. They must be able to function just as efficiently or more efficiently than their for-profit counterparts but with less; less staff, less investors, less of an operating budget.
The amount of pressure put on nonprofit employers can sometimes result in poor hiring practices and other significant employment challenges. Below are four employment mistakes that nonprofits can’t afford to make.
1. Hiring too Quickly.
No employer likes being short-staffed, but rushing to hire new employees to fill empty positions can be a costly mistake. Nonprofits are subject to the high cost of turnover just like for-profit companies, which can take a toll on their already limited budget. Applicants may be eager to accept a position at a nonprofit, thinking it will be fun and fulfilling, only to become frustrated with some of the aspects of the job a short time later. Similarly, employers may be eager to hire applicants based on their availability, only to later find out that they don’t have the work ethic needed to handle the position. By being thorough in vetting candidates as well as upfront with the expectations of the job, nonprofit employers can help reach their ideal employees and reduce their turnover rate.
2. Lack of Documentation and Record-Keeping
Working with limited resources often leads to cutting corners, such as properly documenting employee performance and discipline or keeping records for the required amount of time. However, these seemingly harmless shortcuts can lead to costly fines and penalties. Nonprofit employers may find themselves hit with an wrongful termination lawsuit if they neglect to document employee performance and discipline prior to letting an employee go. Additionally employee records must be kept for a certain amount of time after employment has been terminated, based on federal and state laws. Employers, including nonprofits, are almost always left with the burden of proof, and not being able to provide certain records can make them subject to serious fines and even jail time in the event of an employment-related claim.
3. Misclassifying Employees
Having workers classified as independent contractors relieves the employer from responsibility for payroll taxes, social security, Medicare, workers’ compensation, ACA compliance requirements, and other withholdings that employees are entitled to. Nonprofits can especially benefit from utilizing independent contractors, as it can be more cost-effective than hiring non-exempt employees. According to a 2013 report from the Treasury Inspector General for Tax Administration, employers save an average of $3,710 per employee earning an annual income of $43,007 when they classify the worker as an independent contractor. However, if the worker is misclassified as an independent contractor when they meet the expectations of an employee, the employer can be subject to fines and penalties such as; a fee per unfiled Form W-2, a percentage of the worker’s wages, plus a percentage of FICA taxes the employer should have paid. Interest is also accrued on these penalties daily from the date they should have been deposited.
4. Treating Employees as Volunteers
While employees can volunteer to do certain things for an employer, the FLSA makes it clear that nonprofit employers may not allow their employees to volunteer, without compensation, additional time to do the same work for which they are employed. If employees are performing the same or similar duties as they perform for their paid position, they must be paid for those hours. Even if the employee offers and is eager to volunteer their time, the employer can be held accountable for violating FLSA regulations.
To reduce their risk of making costly employment mistakes nonprofits can engage a PEO to provide expertise on human resources, employee management, payroll, benefits, workers compensation and more. This allows a nonprofit employer to shift all of the compliance management and reporting to a professional organization that already specializes in these types of operations, so that the employer can focus on their mission without worrying about making employment errors.
Emplicity understands that HR
Outsourcing should be simple and meaningful. As a Professional Employer Organization (PEO), we strive to be a great partner in supporting your business. If you would like to request more information on how we can assist your needs, please reach out to us at 877-476-2339. We are located in California – Orange County, Los Angeles, and the greater Sacramento and San Francisco area.
NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of their clients.