One of the most valuable resources we have are the servant-hearted volunteers that support and extend the ministry of the local church. It should be noted that over 50% of our Foursquare lead pastors are bi-vocational and volunteer all or a significant amount of their time to the ministry of church!!
That's a lot of volunteers!
Let's give 3 cheers for Jesus' gifts to the church!!
It's not unusual then for churches to seek ways to show their appreciation for the sacrificial time that is made by their leaders and those who serve with them. Most times this will come in the form of a financial gift or honorarium that acknowledges their contribution but doesn't fully compensate the total time given.
The work of a volunteer is an integral part of ministry work and is under the overall direction of the local church. Whether it is the intended purpose of the church or not, when an individual begins to be compensated the relationship can change from a voluntary/volunteer position to an employment position with all the legal and employer obligations that go with it.
It is recommended that the church take time to carefully consider when making gifts or payments to volunteers. Whether its called a gift or an honorarium or anything else, amounts paid under certain circumstances could be considered employment income.
If the church is not in a financial position to meet these obligations it should refrain from compensation until another time. If the church decides to proceed then there should be clear communication between the church and the person as to the expectations and obligations that are now a part of the employment relationship.
Below are 2 common scenarios and the recommended course of action:
One Time Gifts Less than $500
If the amount paid is one-time and under $500 in one calendar year then the amount may not be considered employment income. In this case no deductions would be taken and no T4 reporting is required.
If amounts exceed $500 in a calendar year the whole amount becomes taxable as employment income.
Systematic Payments exceeding $500
If the total of gifts in a calendar year is over $500 and/or begin to be paid in a systematic way (ie. weekly or monthly) then it is considered employment income.
All applicable payroll deductions are to be taken and a T4 is to be issued at the end of the year.