What is considered an employee?

According to the Fair Labor Standards Act, employment occurs when the hiring party employs another individual “to suffer or permit to work.” However, these guidelines aren’t intended to label all workers as employees. Employees must also have an “express or implied compensation agreement,” states the agency, and that agreement must benefit individuals or the companies where they work.

Simply put, employees must receive money for their work. From a legal standpoint, you can’t expect employees to show up and do their assigned duties for free. Unless your business qualifies for exemptions, you must also pay employees at least $7.25 per hour, plus provide overtime pay when a workweek exceeds 40 hours.

In addition to pay, employees are often eligible for company benefits, such as:

• Health, vision and/or dental insurance
• Life insurance
• Employee stock ownership
• 401K plans or similar retirement programs
• Paid time off from work, such as vacation days, personal days or sick days
• Tuition assistance or reimbursement
• Paid training

Some benefits kick in the first day of employment. Others become available after an employee works for a set time period, such as three months or one year.

It’s also worth noting that employees are often expected to follow a specific schedule as a condition of employment. This may mean committing to a set number of hours each week, such as 30 to 40. Employees may also have to work a schedule created by the employer, such as 8 a.m. to 5 p.m. from Monday through Friday.

What is considered a volunteer?

Volunteer workers can be paid or unpaid workers, though they must offer their time with no expectation of monetary reimbursement or other material gains. This is one reason why managers sometimes get confused about worker classification when hiring volunteers. All employees must receive pay, but pay isn’t mandatory for volunteers.

When volunteers receive pay, they typically don’t receive an hourly rate. Instead, a company may offer a flat monetary sum, such as $50 for completing volunteer work at a local event. Volunteers may also receive reimbursement for expenses related to their work, such as gas or supplies.

The Department of Labor recommends that businesses stick with reimbursement and similar expenses rather than offering payment for the volunteer work itself. Paying volunteers is risky because you may need to reclassify these workers as employees and follow labor laws.

Employers who decide to pay volunteers are not required to offer minimum wage or any other set amount. Payments are at the employer’s discretion and are voluntary. However, an employer must still honor any contractual obligations with volunteers.

For example, if you promise to give a volunteer $25 if they organize your on-site library, you can’t change your mind and only pay them $10 after the job is complete. It’s important to create and follow any employment forms or work agreements that you offer, regardless of whether you’re working with a volunteer or employee.

You should also make sure you collect some basic information from every worker, including volunteer workers. The info you collect may include the following:

• First and last name
• Residential address and/or mailing address
• Phone number
• Email address

Requesting Social Security numbers is common when hiring employees because you must report their income to the IRS. It’s also okay to ask volunteers for their Social Security numbers, especially if you run background checks before accepting volunteer workers.

Volunteers are not required to work a specific schedule. Hours may vary based on your organization’s needs, and a full-time commitment should not be expected.

Volunteer or employee: which label is right for your workplace?

There’s no one-size-fits-all plan for companies debating whether to hire someone as a volunteer or employee. However, there are some factors that can help make your decision easier.

Here are some situations where a business may want to hire an employee:

• You need someone to work full time or follow a set schedule
• You want to offer benefits, such as health insurance
• You want to pay your workers
• You are a for-profit business in a private sector

Businesses may benefit from hiring volunteers in these situations:

• You need temporary help, such as a one-time assistant at a local event
• You are a nonprofit business or civic organization
• You are seeking unpaid workers
• You want someone to provide different services than your employees

You may find yourself using the same workers for paid employment and volunteer work. This is generally fine, but there are some exceptions. For starters, your business cannot be a private, for-profit company. You also cannot expect employees to volunteer for the same tasks that they normally do for pay.

Volunteers and employees can both benefit your company. Make sure you follow state and federal guidelines so all workers are classified correctly.