With churches beginning to reestablish in-person worship, we are beginning to see the hiring or scheduling of nursery workers.
The question has been raised with the author as to whether nursery workers are employees of the church or independent contractors.
This question is important because the answer affects the way payroll taxes are handled and by whom.
- An independent contractor pays their own payroll taxes (FICA, federal and state income taxes). Contractors are paid a flat fee with no withholding of FICA or income taxes. The contractor gets a 1099 at the end of the year.
- An employee of the church pays only half of the total 15.7% payroll tax for FICA (Medicare and Social Security). The church is required to withhold this amount from the employee and submit on a timely basis. The church must pay the other half of the FICA as an expense to the church. The employee gets a W-2 at the end of the year.
As you can see, treating nursery workers as independent contractors is easier for the church and less costly because it reduces the need for bookkeeping, for payroll withholding and tax expenses.
BUT, that may not be the proper classification.
The IRS determines whether a worker is a contractor or employee based on the answers to series of questions about the relationship between the worker and the company, often called the “Twenty Questions.” Click Here to Download the IRS Pamphlet.
Based on the Twenty Questions, the author believes that the proper classification for a Nursery Worker is as an Employee of the Church.
Here’s why:
- The church has the “right” to hire and fire at will, whether or not exercised.
- The church determines when, where, and how the work is to be accomplished, i.e. during worship, Sunday school, or other events, and in the nursery room or other space designated for the care of children.
- The church does a background check and requires Safe Sanctuary training. Background Check – People Facts (formerly Trak-1) https://peoplefacts.com/
All of these actions constitute an Employer/Employee relationship rather than a contractor.
So, what does that mean?
- That means that the church is REQUIRED BY LAW to withhold half of the Medicare and Social Security taxes from employee and forward to the IRS, along with the other half paid for by the church. 2021 Publication 505 (irs.gov).
May withhold Income Tax withholding Form W-4, gets form W-2 - That means that the church must file monthly or quarterly reports to the IRS.
- It also means that the state of South Carolina requires additional registrations.
- State of South Carolina
E-Verify – effective 1/1/2012 – Relates to Alien Employment SCLLR
New Hire Reporting – Relates to Child Services and Child Support. https://newhire.sc.gov/
- State of South Carolina
- It also means that each nursery working must have completed a form I-9, proving the right to hold employment in the U.S. (INS (Homeland Security)
The Immigration Reform and Control Act of 1986 (IRCA) required employers to verify that all newly-hired employees present “facially valid” documentation verifying the employee’s identity and legal authorization to accept employment in the United States Must complete Form I-9 for each employee Must have on file at all times
Click Here for the IRS list of Publications to help you accomplish all of this.
If you need individual help,
please email rlcox@umcsc.org or
Beth Westbury,
Conference Treasurer
Basic Church Administration 
