Worker Classification

In April 2022 Amethyst Operations began working with a newly founded non-profit organization of about 15-20 staff in the voter engagement space. Upon onboarding with the leadership team and after the completion of the employee handbook, the Amethyst team observed a lack of clear worker classifications within the organization’s workforce. At the time the organization was utilizing a combination of contractors, full- and part-time staff, alongside interns, fellows, and volunteers. These workers were also on a variety of different compensation cycles – salary and hourly, bi-monthly and bi-weekly, payroll and contractor pay.

While the organization’s level of programmatic engagement and funding was impressive given the organization’s short history, the lack of clear classification was confusing staff about roles and responsibilities, organizational hierarchy and decision-making, and payroll and on-time contractor payments. Upon further investigation, the worker classification confusion also led to an inconsistent onboarding experience, inequity in compensation and benefits, and friction around performance between managers, employees, contractors, and interns. Eventually, the issue of unclear worker classification also led from a lack of boundaries around work to poor morale and early burnout that was observed in exit interviews.

Ultimately the IRS makes the distinction between an employee (W-2) and a contractor (1099) clear, where the primary distinctions revolve around determining how the work is performed (behavioral), if taxes are withheld or not (financial), and what kind of agreement is in place between the entity and the worker (relationship type).

After an assessment period and becoming more familiar with the organization’s workforce throughout a series of separate projects, it became apparent to the Amethyst team that without a worker classification intervention, the organization was not going to be sustainable, and this issue was highly likely to impact the organization’s strategic goals and programmatic efficiency.

At the end of November 2022, Amethyst presented a proposal to the client’s leadership that outlined the path to resolving the worker classification issues that were causing a negative ripple effect throughout the organization. This proposal included four phases, with an implementation timeline that incorporated the strategic goals of the organization, which are briefly outlined below:

Phase 1: Audit & Define

• Complete an audit of the current staff structure using personnel data in the organization’s HRIS
• Define the working terminology (1099, w-2, exempt, non-exempt, etc) and introduce this language to the team through group and 1/1 conversations.

Phase 2: Diagnose & Assess

• Take outcomes of Phase 1 and identify departments or specific personnel for potential classification change.
• Create risk profiles for necessary personnel that assess the urgency of potential changes.

Phase 3: Plan & Incorporate

• Utilize strategic planning and goals to be thoughtful about personnel classification changes and programmatic impacts.
• Incorporate programmatic and strategic goals into suggested classification changes.

Phase 4: Implement

• Implement classification changes with multiple sub-phases, including a purposeful test phase.
• Gather feedback from staff about classification changes and clarity around roles and responsibilities.

At the time of the original proposal, the suggested implementation was met with little enthusiasm from the Executive Director, despite having support from another culture and operations consultant and staff. Over the next year, as the organization’s programs and budget grew, the negative ripple effects began to have a more tangible impact on the organization. Onboarding remained precarious, where interns were onboarded as both contractors and employees, oftentimes with offer letters being sent to contractors and agreements sent to employees. Attrition began increasing and morale was reported as very low throughout the remaining staff despite the midterm election being over and the 2024 cycle still a way off.

In early 2023 leadership determined that worker classification had become enough of a high-risk topic that action needed to be taken. Amethyst suggested that the intern programs be addressed first – where all interns should be sent offer letters that included a standardized compensation, description of role and responsibilities, and classification as a w-2 employee, along with a pre-determined off-boarding date. Next, Amethyst suggested that the organizational structure be used to determine which contractors were functioning like employees and make an offer of employment to those workers that reflected compensation parity with other comparable employees within the organization.

Finally, Amethyst recommended that the following sequenced projects be completed to establish a healthier understanding across the organization of organizational hierarchy, roles, and responsibilities and to address the negative ripple issues of inequity in compensation and benefits, friction around performance, and low morale, and burnout:

• Establish roles and job descriptions, with standardized salary bands
• Complete a compensation study across the organization
• With feedback from the role standardization process, establish standardized departments and consider if a reorganization of departments and staff is necessary
• Establish a bi-annual 360 performance review process

By October 2023, Amethyst guided the organization through worker classification issues by identifying and transitioning existing staff who needed to be re-classified, onboarding all new staff as benefits-eligible, W-2 employees, and helping to guide the re-evaluation of contractors at the organization. Amethyst also helped the organization address the onboarding process failures, which included a complete overhaul of the hiring to onboarding pipeline, with standardization of documentation, role delegation, and process being the primary changes.

Amethyst also drove the process and timeline for job description and role standardization, which was done to reduce the friction between employees and managers during performance conversations and to increase efficient communication throughout the organization. Amethyst also encouraged the organization to hire a compensation firm to complete a professional compensation study as an effort to communicate to staff that compensation transparency was a value of the organization and to create a working environment where all workers were being compensated fairly.

Ultimately, Amethyst also advised that the organization hire a full-time internal staff person to manage their people operations. Amethyst facilitated that hiring process from start to finish and by late summer 2023, the organization hired a Vice President of People Operations to continue much of the work Amethyst had identified, along with their own goals and procedures.