Archive for the ‘Human Resources’ Category

Reader Question: Personnel issues at board meeting

February 26, 2010

Photo by Marco Bellucci

I work for a small non-profit for over 5 years. We have an Executive Director and three staff. In the past we have been sponsored by other 501c3’s and fell under their board of directors. As of this year, we have our own 501c3 and a new Board of Directors, 6 people who have never served on an active board. Our Exec. dir. has had some experience with Boards but not enough to guide them as to what they should do.

That’s the background….now here is the problem. The Exec. Dir. recently at a Board Meeting brought up personnel issues and in the notes first and last names given. (Is this a problem with confidentiality?) Also, the problems stated were untrue or misrepresented. Neither person has had a previous conversation with the director either before or after this was discussed with the board. What should be done?

First, I am not an employment lawyer, so I do not know the law surrounding confidentiality.

Now with that being said, the Executive Director can definitely (at least in my experience) bring up personnel issues and state specific names and issues at board meetings. In fact, many do when looking for guidance on issues. Particularly in small nonprofits. With that being said, those names are NOT typically published in the minutes, nor are the specific details. Typically the minutes will say something like “Staff issues discussed.” or something along those lines.

I would advise the staff who feel wronged to do two things. First, I would talk to the ED about having the specific names and issues removed from the meeting minutes. Instead, I would request similar wording to what I suggested above. Second, you have the right to talk to the board or board members. Many nonprofits have a grievance policy that advises staff what to do in the case of a grievance with the ED (typically involves going to the board). Since I don’t know the specifics about the issues, I’m not sure what the best course of action here is. Since you found out via the meeting notes/minutes, you definitely have the right to contact the board members and note you would like to provide additional information to what you saw in the minutes.

Have your own question? Email me – kristen@advancementcompany.com

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Organizational Conflict: New Executive Director = Unhappy Employees

February 26, 2010

Photo by deovolenti

Back a couple years ago I was working with an organization that had lost its long-time Executive Director. So, they conducted a search, found a new ED and everyone lived happily ever after.

Not quite so fast…when the new ED started, she seemed great. Everyone got along with her, and she seemed to truly care about the organization. That is until she told a homosexual employee that she thought homosexuality was wrong. And she started not showing up at meetings. Oh, and she started talking about employees with other employees. She also starting talking about changing the focus of some programs, and eliminating others because her personal morals/viewpoints didn’t jive with those program’s focuses. There were so many other issues, I honestly cannot list them all here.

Did I mention this was a tiny organization (staff of 8) and were all friends? Well, needless to say a couple short months after she started the staff were unhappy. Don’t get me wrong, this was obviously not a case new boss-itis. The fundamental problem was that the organization and the Board did not have a clear process for how to deal with this. When one employee went to the Executive Director with her complaints, and later the Board, the Executive Director tried to fire her. When the Executive Director heard another employee went to the Board, she did fire her. The situation got completely out of hand.

Eventually, after the remaining employees had issued numerous complaints to the board (and another employee was fired because she also said something about the ED), the board finally let the ED go. This could have all been resolved if the Board had been more welcoming and discreet about employees coming to them with complaints (they actually told employees they had to tell the ED first about their complaints per the “policy”). This is why it is important to have policies surrounding non-retaliation, whistleblowers, and complaint processes.

Moral of the story: Have a clear policy for complaints against supervisors, and Executive Directors. Here, here, and here are a few to get you started.

The ED Compensation Debate Continues

February 26, 2010

Photo by kiki99

A few months ago I wrote: What is too much when it comes to executive compensation?, which highlighted the firing/forced resignation of the Charlotte United Way’s Executive Director, Gloria Pace King, because the media caught wind of her compensation package- a decision that I completely disagreed with. Ms. King was a phenomenal fundraiser and increased the capacity of the Charlotte United Way because of her work, which is why she commanded the salary that she did.

Unfortunately, it seems like the Charlotte United Way is realizing their error. Looking at their 2008 fundraising campaign, “the agency’s 2008 annual campaign fell $15 million below the previous year’s total”, Mike at Nonprofit Board Crisis highlighted. Mike’s recent post: Firing an ED can have unintended consequences mentions his disagreement with the Charlotte United Way’s decision about Ms. King and discusses the results of the Charlotte United Way’s 2008 campaign.

This just goes to show you that a good Executive Director is worth their weight- Ms. King only cost the Charlotte United Way about $370,000 per year (not including her pension), which is definitely worth the $15 million shortfall they experienced in 2008- which at least in part is related to her firing/forced resignation.

The issue of ED compensation has been brought back to life with the recent debate over having salary caps on corporate CEOs. Give and Take recently had a post on this topic: A Salary Cap for Nonprofit Executives?, that discussed whether the $500,000 salary cap for CEOs should also be imposed on nonprofit organizations. I’m not sure what I think about this, I guess I think that as long as for-profit businesses are allowed to pay their CEOs whatever they want, nonprofits should be allowed to pay their Executive Directors what they deem appropriate.

Having interns, paid or unpaid, is complicated.

February 26, 2010

Photo by International Rivers

The NonProfit Times recently featured an article titled “The Cost Of Unpaid Interns-How to navigate the wage and hour law maze“, which looked at the issue of unpaid interns and whether it is legal for nonprofit organizations to have interns that are not compensated for their work.

It mainly comes down to whether the federal Fair Labor Standards Act (FLSA) are applicable to your organization. Determining this can be complicated, and it in part deals with whether the intern could be considered a “trainee” which means the FLSA doesn’t apply to them and they do not need to be paid. The article lists a six-part test to determine whether your unpaid intern could be considered a “trainee”, to read the article and learn more about the test click here.

So, maybe after reading this you have decided your intern needs to be paid. Or maybe your interns are already paid. Regardless, having paid interns brings up another dilemma- how is their income taxed? Well, every organization does this differently. Some treat interns like regular employees and tax their income as such, others treat interns like independent contractors and mail them 1099s. There are also some nonprofits that do neither- they just hand them a check and shirk any responsibility with the IRS and that intern’s taxes (which is a mistake). It’s hard to say what the best way to do this is, and the IRS doesn’t seem to care much about how your intern is classified as long as taxes are paid on their stipend or wages. So I would just recommend that you pick a way and document why you chose to pay interns the way you do.

I also would like to add that having interns is not only extremely useful for your organization, but it is also very helpful for the intern. It is a win-win situation, the intern gains valuable experience and you gain an unpaid (or very underpaid) worker. So, don’t let this complexity discourage you from hiring interns.

What nonprofit expenses can or should be passed on to staff?

February 26, 2010

Photo by Mike Schmid

I used to work at a nonprofit organization where all staff were expected to volunteer at a big, annual event. This event needed hundreds of volunteers, which is why staff were required to volunteer. Now, the problem wasn’t that the staff were expected to “volunteer” their time, the issue was that in order for staff to volunteer at this event, they had to pay for parking at the event and for a ticket to get into the event (they had to have a ticket to get in to volunteer), neither of which were reimbursed by the nonprofit. So, what nonprofit expenses can or should be passed on to staff?

Well, pretty much none.

Nonprofit workers are typically paid much less that their for-profit counterparts (who get everything reimbursed), so they often cannot afford to shoulder additional expenses on behalf of their workplace. Now, that’s not to say a staff member can’t volunteer to pay for their own parking or ticket. In fact, many do. But, passing expenses off onto workers is detrimental to both the staff and the organization.

Staff may end up feeling slighted that they have to use their already small salaries to pay for expenses like parking and tickets so they can volunteer their personal time at an event. Also, the nonprofit may end up depending on staff to shoulder these and other expenses so often they forget that these expenses exist. And then a time will come when they hire new staff that won’t pay for these expenses. If staff are required to do something as part of their job, then they should not have to use their personal time or money to do it.

PTO vs. Vacation/Sick Time

February 19, 2010

Photo by OneGreatClick

I recently came across a blog post on PTO that inspired a lot of discussion in the comment section. For those that don’t know, PTO (Paid Time Off) is when an organization no longer gives you sick or vacation time, they give you a set number of PTO days and you can use them however you want (vacation, sick days, etc).

Having experienced both forms, I am a fan of PTO. While working at organizations that still use the old fashioned model of a set number of sick days and a set number vacation days, I was often frustrated with how it worked. If I never got sick, then those days just sat there, never being used. Once I got a job that gave me 20 days of PTO and some floating holidays, I loved it. I would never use them all because you might actually get sick. But for people like me, who never get sick, PTO is great. Plus, having PTO made the difference for me when I was considering two job offers. With nonprofit organizations typically paying their employees less than their for-profit counterparts, PTO is an inexpensive way to help retain employees.

For more information about PTO vs. Vacation/Sick Time you can click here and here.

What is too much when it comes to executive compensation?

February 19, 2010

Photo by kevindooley

An article in the Chronicle of Philanthropy’s October 2nd edition focused on the recent uproar over the Charlotte United Way’s compensation package for its leader, Gloria Pace King. Ms. King was set to receive a $2 million pension upon retirement. This edition also highlighted that a recent survey showed that the median compensation among the 291 organizations surveyed was $326,500.

The issue of what is appropriate compensation comes up frequently for boards trying to determine compensation packages for their leaders. Some believe that nonprofit workers should receive much less than their for-profit counterparts, but I have always wondered why? A CEO of a for-profit $40 million corporation in most cases has the same amount of work as the Executive Director of a $40 million nonprofit. Wouldn’t you think that since the nonprofit is serving the public good they should receive equal or greater pay? 🙂

The issue of the pension package for Ms. King started as an anonymous tip to the media, hinting that they look at the organization’s 990 (for those that don’t know, you can find the compensation of nonprofit leaders on the organization’s 990s). The media discovered a large pension payment and immediately reported on it. Of course, many other media outlets then picked it up and the public outcry began. For those that are wondering, Ms. King’s salary was around $370,000, which is a little higher than the median, but considering that she ran a $45 million organization for over a decade and brought it up to the 18th largest United Way (in terms of revenue raised), the compensation is probably reasonable. Unfortunately, the Board gave in to the public pressure and gave her a month to resign or she would be fired. Oh, and they also said they are going to exercise their option to cancel up to $1 million in promised pension payments.

Unfortunately, these types of situations happen often. So, how to avoid it? Seek independent review from outside experts when determining compensation packages, and make sure to look at what similar organizations (both in size and focus) are paying their leaders.

Independent Contractor vs. Employee Part II

February 19, 2010

Photo by ~ littleFIRE ~

Previously we talked about the employee vs. independent contractor situation that many organizations face (both for-profit and non-profit). That post has received an unbelievable amount of interest, it seems there are a lot of people and nonprofit organizations out there trying to figure out how to deal with the independent contractor vs. employee situation. So, I decided to expand on the original post and demonstrate that this transition is not as costly as one may think and it worth it in the long run.

In my previous post, I explained how to figure out whether someone is an independent contractor and what it means if you have misclassified independent contractors. For many organizations, they may realize they are misclassifying their independent contractors but have no idea how to change it, or just simply don’t have the money to change them to employees.

I wanted to take a little time today to discuss this transition and the costs involved. When paying someone as an independent contractor there are typically few costs involved, you pay them for their work (and give them a 1099 at the end of the year) and sometimes you reimburse them for things like mileage or printing. You don’t pay any FICA taxes for them, and they are responsible for turning in their share of federal and state income taxes in addition to paying a self-employment tax.

With employees, costs can rise significantly. With employees, you pay the employer portion of FICA (6.2% of gross compensation up to a limit of $102,000 of compensation) for social security and medicare. You also will typically provide benefits (depending on the benefit package your organization has), pay overtime, need unemployment insurance and if you don’t currently have any employees, you will have to set-up payroll (either in-house or via a payroll service).

With all these new and additional costs, many nonprofit organizations continue to misclassify their employees to save money. Having worked with an organization on this very transition, I can tell you it can be done. It doesn’t cost as much as you would think and it is worth the cost to avoid the risk of being sued by a misclassified independent contractor or being fined by the IRS.

What exactly does it cost? This will vary organization by organization. I will use the organization I worked with as an example. They were paying their independent contractor and acting executive director $44,000 per year. They recognized that the contractor was definitely an employee, so they decided to change their status. They had three new costs associated with this change- FICA, payroll service and unemployment insurance. They didn’t have to worry about overtime pay because it was a salaried position. They didn’t provide health/dental insurance to start (it was a goal once they had enough money). They did provide paid time off- which didn’t cost them anything and would help staff retention. So, for the $44,000 position it cost them approximately $2,700 annually for FICA (6.2%) and about $1,000 annually for unemployment insurance (this cost varies depending on organization and state). The other cost was the cost to secure a payroll service. They didn’t have the staff time or expertise to manage payroll in-house so they hired a payroll service. The payroll service only cost about $30 per month ($360 per year) and took care of withholding and paying all taxes for both the organization and the employee, providing w-2s and keeping the organization updated on employment laws. So, the entire additional annual cost of having an employee instead of an independent contractor was about $4,000, or about a 9% increase. This is very minimal and manageable, especially if your organization is small and only pays it’s independent contractor $10,000 per year.

I hope this helps organizations avoid the risk of mis-classification. If you have any questions about this for your organization, feel free to contact me.

Independent Contractor vs. Employee Part I

February 19, 2010

Photo by michaelramallah

For larger nonprofit organizations, the decision to classify someone as an employee vs. as an independent contractor is fairly simple. But, for many smaller nonprofits with few or no staff this decision can be confusing and costly.

While calling a new hire an “Independent Contractor” can save an organization a fair amount of money in taxes, benefits, reimbursements, it can also cost that new hire as much as half of their paycheck and if the organization wrongly classifies them, it can cost the nonprofit organization enormous IRS fines.

How to know? Well, fortunately they are many excellent resources available online right now to determine whether someone can be classified as an independent contractor. The most basic and easy to use, is the IRS’s 20 Factor Test. These 20 factors include things like what level of instruction will the person have and will they have a weekly, biweekly or monthly pay schedule. To be classified as an employee, a new hire only needs to meet a few of these 20 factors. The IRS explains that these factors fall into three categories that provide evidence about the degree of control and independence the new hire will have. The three categories are Behavioral, Financial and Type of Relationship.

So, you have reviewed the factors and decided to classify your new hire as an independent contractor. What does this mean for them? First, they will need to determine whether they have to pay self-employment tax and make estimated payments. As long as they are making $400 or more each year, they will have to pay self-employment taxes, which is 15.3%. They will also have to make estimated payments (pre-payment of their taxes), if they will owe $1,000 or more in taxes. Click here to read more about these two tax issues. They also need to keep track of their receipts, mileage, income and expenses for their taxes.

What if you wrongly classify a new hire as an independent contractor? It can be costly. Not only will your organization be possible liable for attorney fees, back pay and overtime, but they also could be responsible for fringe benefits and expenses that person missed out on. On top of that, the IRS can fine the organization for its misclassifcation. So, if you are unsure, then make to consult an attorney.

Don’t miss Independent Contractor vs. Employee Part II.