when to begin paying volunteer musicians as employees

[krantz]

New Jersey
One-year-old, non-profit a cappella singing group, all volunteers. Even I, the artistic director (who sings in the concerts and doesn't conduct - we rehearse till we can sing beautifully together without my direction), am not paid yet. The organization receives pay for occasional "gigs" and income from ticket admissions to its concerts. Our annual budget for this year is $9,950.00. The most we would even consider paying our singers would be 50% (divided by 14 singers) of all gigging money and proceeds. So, the most each individual would receive over the year's time in 2012 would be $355.00. Would we need to treat them as "employees" in this situation, taking out payroll taxes from this very small amount of pay? Eventually, we would like to be able to pay them for rehearsals and concerts at a fixed rate, but we won't be able to afford that for a very long time, if ever. Much depends on our fundraising. We are only one year old as an organization (but already 501(c)(3)). Thank you very much for your generous help with this question!

The singers all devote quite large portions of personal time to learning their parts at home and memorizing their music, as well as 2.75 hours of time at rehearsal each week. Most have music degrees and deserve pay for their excellent contributions to our artistic success.What is the name of your state (only U.S. law)?

 

[justalayman]

Not sure I understand. Why would you consider paying volunteers? A volunteer, by definition, is a person that provides some service for free.

 

[krantz]

when to pay volunteer musicians

Because they are professionals and knew all along that our ultimate goal was to be able to pay them for their professional-level work.

This was in our Singer Recruitment blitz, and was and remains a goal of the organization to be able to pay our singers.

The reason they are volunteers now is that we are only one year old as an organization, and the organization has not yet earned enough to be able to pay them as professionals. Non-profits typically do not start off with a whole lot of money already in their kitties to begin paying 14 people immediately when the non-profit first launches.

Thank you for reading my post and replying to seek greater clarity. I appreciate it!

Cherwyn

 

[tranquility]

What is your charitable purpose? It seems like you shouldn't be a 501(c)(3), but, if your are, most of your income is UBI so what's the point?

The volunteer portion of this is problematical as well. Have you had expert advice in the formation and running of your organization (including tax compliance)?

 

[krantz]

when to pay volunteer musicians

Hi,
Thank you for your interest in my question!
Our mission is:

ZEPHYR [VOCAL ENSEMBLE] exists as a primarily a cappella performing vocal ensemble which enriches and educates audiences with music expressing the human spirit from varied cultures, time periods, and styles. Audiences become more deeply involved and aware of how music works. We exist to present music of the highest caliber in composition, in an extraordinary performance of powerful evocation and transformation which enthralls and stirs the imagination of our audience members.

We have sung at quite a few events free of charge:
Warwick, NY's "Applefest"
Vernon, NJs' "EarthFest"
Sussex Co. Arts & Heritage Council's "Evening With the Stars" gala benefit fundraiser
Middletown, NY High School's annual scholarship fund benefit concert
Lafayette Village (outdoor shopping village)'s "Annual Winter Weekend" (to attract shoppers for their holiday shopping)

Most of our performances, in fact, are offered completely at no cost to the public.

However, even groups similar to ours who almost always charge for their performances, such as the famed men's group Chanticleer, and England's The Kings Singers, are non-profits who pay their singers, and dearly, in order that they are able to work full-time for the ensemble and rehearse all day long to perfect their music. We would love to have our singers rehearse all day long, but we must pay them in order for them to quit their day jobs and work for Zephyr Vocal Ensemble.

There is no stipulation for a non-profit music organization to not receive money for its performing and to not pay its professional-level musicians. The New York Philharmonic and The Metropolitan Opera are two such organizations. The Philadelphia Orchestra, The New York Ballet, and the New York Chamber Music series are three others.

I am sorry that there may be some confusion surrounding these questions about non-profits. It is an extremely common thing for a professional non-profit musical organization to pay its musician members and to earn money at its performances. These groups do not retain lots of money in their coffers, but they do charge for performances because professionally-trained musicians should receive wages for their hard work and for having paid for their training. My accountant, when helping me to make application for 501(c)(3) status, explained this to me at the time.

Thank you very much for being interested in my question, and I hope that someone will be able to help me with it! I really appreciate your having read it and replied.

Sincerely,
Cherwyn Ambuter

 

[krantz]

tax responsibilities

Hi again,
I forgot to answer your question about tax advice, etc.

Our accountant has provided us with tax advice, but it proved faulty. She invited us to pay her to prepare a 990 for us (at a financial cost to us, of course). However, I found out online, through my own research, that we are able to file a 990-N postcard because our annual budget is so low.

So, that is what I did. And I was able to do it for free, and it took me all of 10 minutes to do. The IRS accepted it immediately.

We didn't find out till purchasing electronic equipment that we needed to obtain a state-specific tax exemption in addition to our federal 501(c)(3) status. A seller of electronics asked us for our NJ state exemption certificate (the ST-5). I had never heard of it before! So, in short order, I made application for and obtained the ST-5.

So, basically, I feel as though no one has really looked out for us in providing us with the advice we needed. My board has declined me the permission to go and consult with an attorney about paying our singers (because they didn't view it as being within reach) - but we are scheduled to discuss over the summer the possibility of beginning to pay our singers a small % of our group's earnings, and so in an effort to be prepared for that meeting and discussion, I turned to this website for any free advice I could obtain. (I feel the board made the wrong decision.)

Thank you again,
Cherwyn Ambuter

 

[justalayman]

I am sorry that there may be some confusion surrounding these questions about non-profits. It is an extremely common thing for a professional non-profit musical organization to pay its musician members and to earn money at its performances. These groups do not retain lots of money in their coffers, but they do charge for performances because professionally-trained musicians should receive wages for their hard work and for having paid for their training. My accountant, when helping me to make application for 501(c)(3) status, explained this to me at the time.

I believe you misunderstood my statement. I am not confused about a non-profit organization paying employees. What I said is: volunteers are not paid employees.


If you want to make the singers paid employees, then do so. If you want them to remain volunteers, then do so.

What you have to realize is that if you make them employees, you have to go all the way and consider wage laws and all other labor laws.

I have no idea how your organization is set up and the duties of the volunteers/employees but you might consider researching to see if you can treat them as independent contractors. That would allow you to ignore many of the labor laws and wage laws.

 

[krantz]

independent contractors vs. employees

Hi, Justalayman,
Thank you for your terrific advice. Yes, this is actually what I am trying to get at with my query here: whether they must be paid as employees, or whether we may pay them as independent contractors.

I did call Chorus America, of which I am a member, and they couldn't provide me with guidance on this question, as they said every state has its own labor laws and they can't speak to what the laws are in NJ.

Had been hoping that someone here could assist me. Tried to get "independent contractor vs. employee" as a keyword for my original post, but it was too many letters. Probably should have made it my title of the original post.

Thank you,
Cherwyn Ambuter

 

[justalayman]

Had been hoping that someone here could assist me. Tried to get "independent contractor vs. employee" as a keyword for my original post, but it was too many letters. Probably should have made it my title of the original post.
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There are a few here much more informed than I on differentiating between an employee and an IC and I would hope they chime in on what has finally come down to a clear question. I would suggest reviewing the IRS site on employee vs. IC:

Independent Contractor (Self-Employed) or Employee?

It is often difficult to determine IC or employee status.

You are in a unique situation and I, personally, would have a difficult time giving you much clear direction on how you could deal with the people and continue to have them as IC's rather than employees.

 

[QueenofEngland]

Whether you pay them as employees or independent contractors, you have to follow labor laws, which included paying at least minimum wage. If you can not do that, then you need to rethink paying at all right now. $355 only pays about 44 or 45 hours of time, and unpaid time above that isn't legal. The rehearsals alone are about 143 hours a year, so I'm not seeing a way paying them would work within the law at this point. Even if someone is salaried, the hours worked can not exceed certain legal limits (the pay divided by hours work must not be less than the fare hourly wage for the position). State labor laws vary, but there are federal rules regarding pay (some states can set higher minimums, but none can go below the minimum set federally).

Many artistic non-profits do pay people, but they've also been around for a very long time. It's admirable to want to pay these volunteers and it shows their time is valued, but you have to look at what you can legally do at this point. You can't afford yet to convert them to employees or contractors.

Perhaps there is a way to give the volunteers cash gifts as a thank-you. I've been part of volunteer groups that received non-cash gifts as a thank-you for our work, but I don't know if there are limits to how much can be given.

For now though, this money may be better spent building up the organization more to help you reach the point where you can hire these volunteers full time, delay small beans now for a faster big pay-off.