Updated: Aug 12, 2020
Starting a Non-Profit or Social Enterprise can seem daunting – especially if you don’t have the right team to back you.
While it is common for non-profits and social enterprises to run on the hard work of volunteers, it’s a common misconception that there aren’t employees at these organizations.
If you have the capacity or funding to pay your employees, it’s important that you pay them appropriate wages and ensure their working conditions are acceptable.
We’ll go through the arrangements and legal documents you may need as a fresh social enterprise or non-profit.
***Please note that the following does not constitute legal advice. ***
Paying Employees As A Non-Profit
Retaining talent is immensely difficult – especially if you’re competing against for-profit companies with attractive salaries.
If you have the funding and you’ve decided to engage your staff as employees, it’s important to make sure that you’re paying the minimum wage. This applies to tax-exempt charitable non-profits as well.
Further, if you’re a tax-exempt non-profit, it’s important to make sure that at the upper levels of management, employees are being paid a ‘reasonable’ wage and aren't considered ‘excessive’. This can usually be done by looking to the market rate for wages for similar positions or contacting your non-profit State Association.
It’s also a good idea to get an Employment Agreement in place – to make sure both your organization and employees are aware of each other’s rights and responsibilities.
Protect Your Intellectual Property
Do you have volunteers putting together your web content? Or contractors developing your website?
Depending on the nature of your work, regardless of whether you’re engaging volunteers or employees, it’s important to make sure your intellectual property is protected.
It’s also important to make sure that intellectual property is contained within your organization. This can be carried out in a variety of ways. You could have intellectual property protection clauses within your Employment Agreements or Volunteer Agreements.
You could also get your staff to all sign Non-Disclosure Agreements to make sure that they’re contractually bound to keep your commercial information confidential.
Non-Compete and Non-Solicitation
Building your non-profit or social enterprise from the ground up is an incredibly difficult feat.
It’s crucial to make sure that your staff aren’t being poached by your clients or other non-profits or social enterprises.
Having non-compete and non-solicitation clauses within your agreements de-incentivize and restrain your employees from disclosing your confidential information or taking advantage of your client relationships.
Depending on your business structure, you may have equity to offer your staff in exchange for their work. This is called sweat equity and it can be a great tool for your Social Enterprise.
It’s firstly imperative to decide how much of your social enterprise or start-up you’re willing to give away. You don’t want to be in a situation where you’ve given away too much!
If you’re offering sweat equity, you should also make sure you’ve established clear cut milestones or tasks in exchange for equity.
It’s also important to make sure that your staff are aware of what it means to have equity – especially as most start-ups and social enterprises don’t turnover revenue until much later on.
It’s a great idea to get a Sweat Equity Agreement in place to make sure both your organization and your staff are aware of how much equity they’re receiving, for what work they’re carrying out and over how many years this equity will vest (if applicable).
Building your team can be a complex task – but after all, they are the backbone of your organization.
It’s important to make sure your organization is protected – that you own all the intellectual property and your clients won’t poach your staff!
If you have enough funding to pay your staff – it’s important to make sure you’re still adhering to minimum wage laws and you take care of other employee entitlements.
If your business structure allows you to give equity in exchange for your employee’s work, it’s important to make sure you’re doing it right – that you’re not giving away too much of your company.