Why a PEO Might be the Right Choice for Your church
Balancing payroll compliance, back office, and the continuing quest for comprehensive benefits packages is a challenging responsibility for the head of any organization. But as a church leader, it becomes a serious problem when these tasks eclipse your moral, ethical, and spiritual calling to minister to your congregation.
This issue is a common one, and many churches elect to utilize a third party payroll company to mitigate these demands. There are literally thousands of businesses out there that are designed to cater to your unique tax status. But it can be a challenge to find a partner that not only provides competent payroll and HR assistance, but also reflects your ministry’s beliefs and values.
In this article we will outline exactly what our company, UPsource, does, how it functions, and what benefits we can provide your church or religious institution.
What is UPsource?
UPsource provides payroll services as one of the core services we offer. But what sets us apart from the crowd is our business model. We are a PEO, or Professional Employer Organization. This means that we operate using a system called co-employment. In a co-employment relationship your church will maintain its 501(c)(3) or tax exempt status while we become what is known as the Administrative Employer (or “Employer of Record”). This means that you will still hold all the control of the day-to-day operations of your ministry, while we process your payroll and the admin associated with it under our Federal Employer Identification Number (FEIN). In doing so, we assume the responsibility of the legal liabilities associated with your church’s payroll and employment.
We also provide comprehensive Human Resource Management designed to encourage coherence within your church’s administrative body. Additionally, because of our business model, we are able to provide healthcare and benefits packages that are typically inaccessible to small businesses and organizations.
Companies that utilize PEOs regularly report greater productivity, lower turnover rates, higher employee satisfaction, and better work-life balance than businesses that do not. This is because, with overhead covered, more time can be allotted toward furthering goals, expanding missions, and improving employee relationships and work culture – all without requiring excessive additional legwork.
What Sets UPsource Apart?
Of course, not all payroll companies are equal, and we are no exception. Many PEOs are not prepared to offer the plans and benefits specifically associated with religious organizations. But UPsource is equipped to offer the retirement packages, FICA exemptions, and Clergy Housing allowances specifically designed for ministries.
Additionally, we abide by our commitment to earn and renew our relationship with our clients on a month-to-month basis. This means that we will never make you sign a long term contract locking you into a plan that may or may not continue to reflect your needs. We also believe that every service we offer should be readily accessible to you at no hidden cost. While some PEOs will charge extra for HR and benefits packages, UPsource makes the entirety of our plans available in exchange for a flat rate Per Employee Per Month fee (or PEPM).
It is important to note that UPsource, itself, holds no specific religious affiliation. We partner with both secular businesses, churches, and nonprofits alike. We believe that every company, regardless of religious affiliation (or lack thereof), deserves the chance to legally operate at its highest potential. We believe that every employer should be able to prioritize their mission of growth and fulfillment, without the burden of overhead holding them back, and this is especially true for church ministry.
Frequently Asked Questions
Our church does not have 501(c)(3) status. Can you still work with us?
Yes! As long as your church or religious institution adheres to the tax exemption guidelines dictated by the IRS, we are able to work with you.
Are you able to offer churches a 304(b) plan?
Yes, we do have 403(b) plans available in addition to our standard 401(k)s.
Do you allow for a Clergy Housing Allowance?
Yes, we do. We also offer SECA allowances and FICA exemptions.
Can our church keep or obtain Ministerial Exception if we partner with you?
Absolutely, partnering with us will not jeopardize any Ministerial Exception you might have or apply for.
Are you able to accommodate faith-based employment and hiring practices?
Yes! Your church has special exemptions that give you legal permission to exercise discernment in regards to hiring and terminating employees. Establishing a relationship with UPsource does not affect your ability to operate as a religious employer. This is because of our unique co-employment arrangement only available through a PEO.
What if we terminate an employee for religious reasons? Will you attempt to prevent this or intervene?
Absolutely not. Churches are allowed to discriminate for faith-based reasons and are not held to the same standards as non-faith-based companies. If you have an elder or minister whose strictures cease to align with those of your church or denomination, we will support your decision to terminate. We do, however, require that all terminations are reviewed by UPsource before being finalized in order to prevent any discrepancies that can result in legal action being taken against your religious institution.
Do you provide access to insurance plans that specifically relate to religious employment decisions?
Because of our status as a secular organization we cannot obtain quotes for policies pertaining to religious employment on your behalf. However, our insurance team is able to secure those policies for you organization to be managed by UPsource, allowing you more time to attend to the needs of your congregants.
Do you require anything in your client’s/co-employer’s employee handbook that may run counter to what the average church would approve of?
No. UPsource has a pre-existing handbook that can be tailored to any of our client’s needs, including churches and non-profits. We also have clients join us with pre-existing handbooks. We do require access to these handbooks for our records, but we do not encourage adjustments unless we discover an egregious legal error or a review is requested.
Our church has access to certain discounts because of our non-profit and tax exempt status (such as fundraising tools, tech solutions, marketing software, web hosting options, etc). Will we lose those benefits if we partner with you?
No you will not! Because of the co-employment model, you will still maintain your 501(c)(3) or tax exempt status, meaning you won’t miss out on any of those discounts.
Our church prefers to pay our employees on a semi-monthly basis. Can you accommodate for this?
Yes we can. Our software is equipped to provide payroll on a weekly, bi-weekly, semi-monthly, and monthly basis.
Do you provide bookkeeping services in addition to payroll and HR?
We do not. But we can ensure whomever you hire to perform this task is paid in a timely fashion and receives the chance to access all benefits that are available to the position. UPsource also works hand-in-hand with our client’s accounting/bookkeeping teams to ensure accuracy and provide timely reports to streamline operations.
Can you provide clergy specific tax advice?
As a PEO we cannot legally offer tax advice to anybody. However, we can utilize multiple example paystubs that present available payroll and exemption options and make adjustments as needed, ensuring you come to the best financial choice for your organization.
If we agree to co-employment with UPsource, will our church still be able to opt out of state programmed unemployment or disability insurance?
It depends on your state’s laws. Some states require churches that partner with a PEO to pay Unemployment Taxes. However, because we operate out of one of the cheapest markets in the country, the savings generated from using our benefits packages has served to more than cover the difference for some of our out-of-state clients who cannot maintain their exemption.
This would be the only nontraditional tax that will be applied to your organization as a 501(c)(3) entity.
Would the way you handle liability and potential lawsuits differ from how you handle it with non-faith based organizations?
No. We respond to all potential liability lawsuits the same. There are still lines in the sand we abide by.
In a liability suit where a former employee seeks to sue both members of the co-employment relationship, would you present a united front should we ask you to handle a case similarly to us? If we decide to settle or take the case to court, would you align with us?
As the Employer of Record we officially hold all legal responsibility associated with termination decisions. This means that, in the case of a former employee seeking to sue, UPSource, not your church, would be the party served.
To prevent this legal backlash, our contract requires that all termination decisions go through us, to make sure proceedings are legal and above board.
However, if you terminate an employee without our knowledge and consent, we would consider this to be a violation of our agreement and we would be forced to file a counter suit for breach of contract.
Our church conducts international mission trips. Are you capable of ensuring those of our staff on that mission trip are able to get paid while overseas?
As long as they have a US-based bank account, yes we can.
What if our church, during an international mission trip, hires someone from the country we are ministering in to perform a task for us, could you ensure that individual gets paid?
In this case we would treat that foreign worker as a 1099 employee. Since UPsource is only licensed to operate using US-based bank accounts, the worker would then have to wire the paid funds to their home account. However, if they use a national bank they will be able to access the funds anywhere. We are able to deposit to any account with a US routing and account number. This includes services like CashApp and Venmo.
Our church sponsors missionaries that minister in foreign countries. How would you handle paying them?
That missionary would be considered an employee of the church. As long as they have access to a US bank account, we would be able to offer them direct deposit payment.
Do you offer any discounts if our church enrolls with UPsource?
We do! We offer a 7 percent discount for religious institutions.
Is UPsource Right for You?
UPsource offers payroll, compliance, HR, and benefits that are specifically tailored to your unique tax situation. If you believe our model is the right fit for you please reach out to us through our Church Leaders Portal to schedule an interview and a free quote.
We recognize the importance of your calling and believe you should be able to minister to your flock without your complex back office requirements holding you back.
