This is one of the most common questions I get from volunteer treasurers.
“If someone is a contractor, can I put them under Employee Remuneration and Related Costs in the XRB report?”
Usually, the question isn’t really about accounting.
There’s often a concern that including contractor costs under “employee” might imply an employment relationship — and all the legal responsibilities that come with that.
Let’s separate the two things:
They are not the same.
In the 2023 updates to the Tier 3 and Tier 4 standards, the External Reporting Board explicitly stated that contractor costs can be included under:
Employee Remuneration and Related Costs
This category is intended to capture the costs of people who are working in the organisation, even if they are not legally employees.
So yes — contractors can sit here.
If your contractor is doing general organisational work, for example:
Then it is entirely appropriate to include their payments under:
Employee Remuneration and Related Costs
From a reporting perspective, they are functioning like part of your internal workforce.
Most small non-profits use contractors simply because:
That doesn’t change the nature of the cost in your financial statements.
If the contractor is directly delivering a programme or service — for example:
Then their costs may be more appropriately categorised under:
In this case, the contractor cost is part of delivering your mission, not part of running the organisation itself.
Like many things in small charity reporting, the exact label is often less important than being consistent year to year.
If you classify your contracted General Manager under Employee Remuneration this year, then move them to Service Delivery next year, you make it harder to compare your financial performance over time.
The purpose of the categories is to allow meaningful comparison — both internally and externally.
So choose a treatment that makes sense… and stick with it.
Putting a contractor under “Employee Remuneration and Related Costs” in your XRB financial statements:
It is simply a reporting classification.
Accounting categories do not determine employment law.
If you’re ever unsure, ask yourself:
Is this cost part of generally running the organisation,
or part of delivering a specific service?
That question will usually guide you to the right answer.
Ask Duncan anything — big or small. He’ll get back to you ASAP, and your questions will help improve the information here for everyone.
