I was wondering if a 501c7 can employee people that are members of the organization or compensate those that hold positions in the organization?

Hello r:

Yes.

excon

The IRS has no restrictions here - so yes, a club can hire members as employees. For examplle, it is not unusual for a country club to hire a member or child of a member to serve as life guard, greens keeper, waiter, etc. However, I would hope that your club's bylaws specifically require board approval for any compensation made to a board member or officer.