Volunteer vs. Employee: The Legal Difference Churches Must Understand

I’ll be honest — this is one of those topics that makes church leaders sigh. It doesn’t sound as exciting as launching a new ministry or planning Easter Sunday. But I’ve seen more than one church’s leadership team have to hit pause on their big dreams because they got tangled up in a very unglamorous mess: misclassifying someone who serves at the church.

It usually starts with a simple question:

"They’re just helping out — we don’t need to make this complicated, do we?"

I get it. The heart of ministry is people showing up because they want to be part of God’s work. But here’s the thing: the IRS, the Department of Labor, and state employment agencies don’t share the same warm, relational filter that church leadership does.

To the law, “volunteer” and “employee” are two completely different categories. If we blur those lines, we’re not just risking a little paperwork trouble — we could be opening the door to back taxes, penalties, and in some cases, lawsuits.

Why This Distinction Matters

When I consult with churches, I often find that the leadership thinks they know the difference between a volunteer and an employee… until we start digging into the details.

It’s easy to say, “Well, we don’t officially pay them, so they’re a volunteer.” But then you look closer and realize they’re:

• Getting a monthly “thank you” check.
• Reporting to a supervisor.
• Working a consistent schedule that the church dictates.

To you, that may still feel like a volunteer arrangement. To the law? That’s an employee.

And here’s where it gets sticky — misclassifying someone isn’t just a “technicality” problem. It can lead to:

• Back taxes (and interest).
• Penalties from the IRS or state agencies.
• Wage disputes for unpaid overtime or benefits.

The ripple effect? A hit to your finances, your reputation, and the trust of the people you lead.

The Legal Definition of a Volunteer

In most cases, a volunteer is someone who:

• Offers their time and skills freely.
• Receives no pay or significant benefits.
• Serves without any expectation of compensation.

A thank-you gift or occasional dinner? Totally fine. A Christmas card with a coffee gift card? No problem. But if you’re giving regular payments tied to the work they’re doing — especially if it’s a set amount at set intervals — you’re crossing into employee territory.

Think of it like this: if a person could reasonably expect to receive money every time they serve, you’re probably not looking at a volunteer relationship anymore.

The Legal Definition of an Employee

An employee is someone who:

• Works under the church’s direction and control.
• Has defined duties and responsibilities.
• Is compensated — whether hourly, salary, or with regular stipends.

One of the key tests is control: If you decide what they do, how they do it, and when it needs to be done — and they’re paid — that’s an employee in the eyes of the law.

Even if you call them a “volunteer,” “intern,” or “helper,” the legal classification depends on the facts of the arrangement, not the title you give it.

Common Misclassification Scenarios in Churches

I’ve seen these same three scenarios play out over and over again:

1. The “Paid Volunteer” Trap

You have a faithful member who helps with your media ministry. They come in every week, run the livestream, and stay late to troubleshoot problems. You start giving them $200/month “as a thank you.” At that point, you may have just created an employment relationship in the eyes of the law.

2. The “Contractor” Who Isn’t One

A worship leader is paid with a 1099 because it seems easier than running payroll. But they use your instruments, follow your rehearsal schedule, and are expected to be there every Sunday. That’s control — and that’s probably an employee.

3. The “Honorarium” Confusion

You give someone a small honorarium for helping at multiple events. It’s not just a one-off; it’s ongoing. The repeated nature of the payment tied to their work can turn what feels like “gifts” into taxable wages.

The Risks of Getting It Wrong

Misclassification doesn’t just lead to uncomfortable conversations with the IRS. It can create:

• Unemployment claims from someone you thought was a volunteer.
• Workers’ compensation disputes if someone gets hurt on the job.
• Overtime pay demands if they should have been classified as non-exempt.

I once worked with a small church that had a volunteer coordinator for over a decade. They paid her a small monthly stipend, and everyone thought of her as a volunteer. When she stepped away, she filed for unemployment — and the church had to explain to the state why they hadn’t been paying into unemployment insurance. It was a costly wake-up call.

How to Protect Your Church

Here’s the good news: this isn’t complicated once you know the rules. The key is to set things up right from the start and review them regularly.

• Be Clear from the Start: Define the person’s status in writing — volunteer agreement or employee contract.
• Avoid “Grey Area” Payments: If you’re giving regular money for ongoing work, classify them as an employee.
• Use Proper Onboarding: Employees need full legal onboarding. Volunteers should have signed volunteer agreements and (if applicable) background checks.
• Review Annually: Roles evolve. A volunteer who starts leading a ministry every week and receiving stipends may need to be reclassified.

Why This Matters for Your Church Size

Classification mistakes can hurt any church, but the impact changes with your size:

• Small Churches (<900 members): Even one misclassified role can create major financial strain.
• Growing Churches (900–2,500 members): As your team grows, the risk of blurred lines between volunteers and paid staff increases.
• Large Churches (2,500+ members): Complex staffing structures require regular legal reviews to stay compliant.

No matter your size, Church Law Strategy can help you review your staffing classifications so you can focus on ministry without worrying about what the IRS thinks.

Our Links

• Church Legal Audit and Action Report
• HR & Volunteer Onboarding Process Guide
• Worker Classification Review for Churches

Other Resources to Check Out!

• IRS: Tax Guide for Churches and Religious Organizations
• U.S. Department of Labor – Misclassification Resources
• Christianity Today: Church Leadership Articles

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship between you and Church Law and Strategy or its representatives. For specific legal advice tailored to your church or organization, please consult a licensed attorney.