Independent Contractors

Independent Contractors (ICs) submit invoices for payment and payment is made through Accounts Payable. Taxes are not withheld. A W-9 form is required to set them up as a vendor for payment, and a compliant invoice must be attached to the payment request. If the contractor will be receiving $2000+ in a calendar year as of January 1, 2026, Social Good Fund must evaluate their background and scope of work to ensure contractor is an appropriate classification, and must review and sign any related contracts. See below for the full process of hiring an IC. Note that Project Directors cannot be hired as Independent Contractors for work they do for their project.

Independent Contractors (ICs) are commonly hired to do discrete, project-based work such as web design, consulting, event planning, and other services. IC work is generally highly skilled and specialized, and it is generally not administrative or core programmatic work. Each Independent Contractor must be evaluated to ensure proper classification. If a worker does not qualify as an IC, they can usually be brought on as an employee (even if temporary and/or part time).

For ICs that you are certain will earn less than $2,000 in a calendar year, the Project Director (or other authorized Project representative) can make the determination to hire someone as an IC. A contract is not required by SGF, but if the Project or the IC prefers to enter into one (or if it makes sense for other liability or ownership reasons), SGF will still need to review and sign the agreement. Please use the same process (outlined below) as with contracts required by SGF.

For ICs that will be earning $2,000+ in a calendar year, SGF will need to make the final determination as to whether someone can be an IC, but we would like you to review the requirements as well before asking us to review, which will hopefully reduce the chance of any surprise or disappointment if we determine they cannot be an IC.

Please do not pay independent contractors for services yourself and then seek reimbursement.

All ICs earning $2000 or more in a calendar year, as of January 1 2026, must have contracts that have been reviewed, approved and signed in advance by SGF. When we evaluate whether a worker can be an IC, we must make sure they:

• Meet all the requirements for ICs as outlined by the IRS.

• Meet all the requirements for ICs in the state where they are located. (See this guide for CA or look up the requirements in the applicable state.)

• Have a valid business license.

• Provide a completed W-9 form. (International ICs will provide a W-8 form instead.)

Please visit the Hiring Contractors page on our Members Portal for more information about the IRS and state requirements where your contractor is located. If you think the person or company you want to hire meets all the requirements, please fill out the Contract Initiation Form, also found on the Hiring Contractors page, if you plan to pay them $2000 or more in the calendar year.

The Contract Initiation Form will give SGF the information we need to evaluate whether it is okay to classify the worker as an IC. It will also give us the information needed to generate a contract for signature if we determine they can be an IC. We will respond to your form submission within 3 business days to either: let you know if the contract can be approved, request further information, or let you know that it will take us more time to review your request.

If we are able to approve your request to onboard a contractor, we will generate a contract and send it out for signature to: the Project Director, the IC, and SGF’s signer. Once the contract is signed, the IC can begin work.

A copy of the template that we use for ICs is provided for reference on the Hiring Contractors page. It is preferred that you use our agreement template, and it will speed the process. However, if the IC has a template they strongly prefer to use (common when contracting with larger companies), we can also review their template. There is a place on the Contract Initiation Form where you can upload the contractor’s template or proposed contract.

Note that any contract (whether on our template or not) must clearly state your expectations as to what goods or services are to be provided by the contractor, and in what time-frame. Additionally, the contract should state the terms (e.g, forfeiture of payment, or partial payment) should the contractor fail to meet the obligations set forth in the contract. The contract must indemnify Social Good Fund and spell out the terms of the engagement.

If, after reading the requirements, you don’t think your worker can be an IC, or if we do not approve your proposed contractor, don’t despair! In most cases, we will be able to bring the person on as an employee. Remember, employees can be part time and/or temporary if it’s a small amount of work they will be doing. Visit the Hiring Employees page of our members portal for more detailed information and next steps. Contact [e-mail] if you have questions.

For reference, here is a chart outlining some of the differences between ICs and Employees:

	Independent Contractors	Employees
How they are paid	ICs submit invoices that are paid through our Accounts Payable process. They can be paid via check or direct deposit (or any method available through AP)	Employees are paid via our payroll system only. They submit timesheets if they are hourly/non-exempt. They are usually paid via direct deposit that is set up at the beginning of employee onboarding.
Type of tax forms	ICs need to give us a W-9. They receive a 1099 for each year that shows their total earnings from SGF if their earnings meet the threshold for IRS reporting ($2000 or more in 2026).	Employees provide a W4 form (completed during onboarding). At the year end, they receive a W-2 showing their total earnings and taxes withheld.
Benefits eligibility	ICs are not eligible for any type of employee benefits.	Employees are covered by SGF’s Workers Compensation insurance if they are injured on the job.
Cost	The only cost of hiring an IC is usually the cost of paying for their work per their invoices	Costs for employees include: -Salary -Payroll taxes (dependent on location, but you can estimate 13.5%) -Benefits (cost varies depending on project tier selected)
Liability and liability insurance	ICs are not covered by SGF’s liability insurance and should have their own insurance for their own business.	Employees are covered by SGF’s liability insurance as well as Workers Comp.
How they do their work	ICs control when, where and how they will complete their work. They supply their own equipment and tools.	Employees are often expected to work a certain schedule, they often have a supervisor, and they often have equipment provided by you as the employer.
Whether they are “in business”	ICs are in business for themselves and offer their services to the general public. They don’t have titles given by the organization.	Employees can have more than one job, but they are not in business for themselves.
How the work relates to the organization’s mission/core work	ICs perform work that is outside the core work of what the organization does. (The classic example is that of a plumber working at a bank. Plumbing is something the bank may need, but it is not what the bank does.)	Employees perform all kinds of work for organizations. Any work that’s considered the organization’s “core” work should be done by employees.
How the relationship ends	ICs must follow the termination procedures outlined in their contract before stopping work (or they will be in breach of the contract).	Employees can quit at any time or be terminated at any time by the employer.

Once the work has been completed, you will need (and want!) to pay your IC.

The IC must submit a compliant invoice to you for the services they have provided in order to be paid. The invoice should include a brief description of the services provided and the time period in which they were provided.

Use the request for payment forms on the Members Portal to pay vendors/contractors/consultants.

Please Note: Project Directors, regardless of their background/credentials cannot be Independent Contractors for their own project. Project Directors may either be compensated as employees, or can serve the project as volunteers. The reason for this is that ICs should not be doing work that is considered “integral” or core to the work of the organization, in this case, the project. We have received legal advice that it would not be possible to justify an argument that a Project Director’s role (which is similar to an Executive Director role for this purpose) is not integral or core to the project’s work.