Jennifer Loftus

Nonprofit Human Resources: The Full Guide & Best Practices

No matter your nonprofit’s specific mission—whether you’re focused on dolphin conservation or empowering refugees to succeed in their new communities—it is people who make your work possible and move your mission forward. Donors, volunteers, and board members are the people you count on to deliver your mission to your beneficiaries.

But then there’s your team of staff members. These individuals not only work for your cause. They also work for your organization, usually from nine to five, five days a week. And as their employer, it’s your responsibility to ensure that their experience in your workplace is a positive one, especially if you want to retain top talent at your organization.

This is where human resources management comes into the picture—yes, even for nonprofits! Incorporating human resources into your internal operations is critical if you want to hire, train, effectively compensate, and retain great employees for your nonprofit—employees who are satisfied with their jobs and contribute to your organization’s goals.

Since nonprofits are funded solely through donations and grants, it can definitely be a challenge for new or growing organizations to find the time or resources to build out a dedicated HR department. However, guidance from an HR expert and concrete policies and protocols can play a major role in ensuring your organization’s continued growth.

In this guide, you’ll get a full overview of the key responsibilities and broader functions of human resources for nonprofits. Here’s what we’ll cover:

We’ll also give you plenty of information about how to get started integrating human resources into your overall organizational strategy. Ready to hone the employment experience your organization offers to its staff? Let’s jump right in!

Nonprofit Human Resources: Frequently Asked Questions

Nonprofit HR is the area of your organization’s internal operations that is responsible for managing your organization’s employer-employee relationships. This usually involves managing things like recruiting, hiring, training, payroll, wellbeing and recognition programs, and exit interviews, as well as the creation and implementation of important workplace policies.

Understanding the basics of human resources will be important as your organization grows. To lay a strong foundation for your understanding of nonprofit HR, let’s take a look at some frequently asked questions.

Do nonprofits need HR?

Yes!

Why? Nonprofit HR encompasses areas that are both important for developing strong teams and required for compliance with federal, state, and local law.

One huge misconception among the general public is that nonprofit organizations are partially or entirely exempt from employment regulations, but that’s not true.

All organizations with employees (or that employ independent contractors) need to comply with any applicable laws and policies, regardless of the organization’s 501(c)(3) status.

Your team needs to be familiar with the employment landscape in any locations where your nonprofit operates. For information specific to your state, reach out to your state’s Department of Labor office.

Also note that nonprofits are required to withhold state, federal, and local income taxes from employees’ wages. If your nonprofit fails to do so, your board members (who have fiduciary responsibility for your organization) may be held responsible. Check out these resources from the IRS to learn more about employment taxes for nonprofits.

What are the differences between for-profit and nonprofit HR?

While nonprofits and other organizations are held to the same employment regulations, their day-to-day HR functions differ in other ways:

This image lists the unique challenges of nonprofit HR, which are covered in the text below.

-Mission-Driven Nature. Simply put, nonprofit HR is mission-centric, supporting the organization’s ability to pursue its mission effectively. For-profit HR is inherently more profit-centric, supporting the organization’s ability to operate profitably and efficiently. Fostering employee engagement and retention is important for both, but explicitly tying it all together with the driving mission is much more central to the responsibilities of a nonprofit HR team.

-Limited Resources. As mentioned above, many nonprofits aren’t able to dedicate a lot of time, money, and staff power to HR-related tasks. This can leave organizations at risk of failing to meet employee needs and comply with employment regulations.

-Volunteer Management. Managing unpaid team members is an important task that typically falls under the nonprofit HR umbrella. Volunteers are crucial players for nonprofits, so engaging and retaining them can be a significant strategic investment.

-Project-Based Staffing. Nonprofits of all sizes often rely on project- or program-specific grant funding. For-profit organizations generally aren’t as limited in how they allocate and schedule their projects, often wrapping up new initiatives only if they’re unprofitable. This key difference means that nonprofit staffing can be more logistically complex than in a for-profit business.

-Recruitment. Smart recruitment is a challenge for any organization, but nonprofits face a more difficult hiring environment. Tighter nonprofit budgets mean that nonprofits often can’t rely solely on salaries to recruit competitively. Nonprofit HR teams need to take a different approach to compensation to create an attractive, mission-driven workplace.

As corporate social responsibility, or CSR, has become a more prominent element of how for-profit organizations do business over the past decade, some of these distinctions between types of HR have begun to blur slightly. Specifically, more and more businesses prioritize their social missions the same as (or even above) their bottom line, just like nonprofits.

Internet businesses and tech startups are good examples of sectors that have learned from nonprofit HR best practices. Mission statements; diversity, equity, and inclusion efforts; culture-building initiatives; a focus on work/life balance and employee engagement; and increasingly flexible compensation strategies are all common nonprofit approaches that are frequently adopted by for-profit HR teams.

What HR policies should a nonprofit have?

HR policies are the rules and processes set forth by an organization that establish how the organization will manage its employer-employee relationships.

Here are some common examples of must-have HR policies for nonprofits:

-At-will employment
-Employee conduct, attendance, and punctuality
-Anti-harassment and non-discrimination
-Health and safety
-Pay and timekeeping
-Meals and breaks
-Leave and time-off benefits
-Performance management
-Overtime
-Alcohol and drug policy

The beauty of HR policies is that they establish a framework for preventing problems and dealing with any delicate situations that may arise. They also ensure that everyone is treated fairly and knows what is expected of them at work.

Who should be involved in managing nonprofit HR?

Nonprofits that are unable to build out a full HR department or hire an HR manager may rely on an executive director or board member to take on HR responsibilities.

Because these team members may not be familiar with the ins and outs of employment law and tax implications, you should work closely with your lawyer or insurance agent to maintain compliance.

It’s also recommended that you work with an HR consultant that specializes in nonprofits’ needs. A consultant can provide an outside perspective on your organization’s structure and operations that can help you move forward with your HR management efforts in a positive direction.

Understanding these nonprofit human resources basics can help you take a critical look at your own nonprofit’s current HR processes to improve them for the better. To help, we’ll next take a deep dive into the key responsibilities of nonprofit HR!

Key Responsibilities of Nonprofit Human Resources

There are a number of responsibilities that nonprofit human resources professionals typically manage at their organizations. Though HR professionals shoulder the brunt of these responsibilities, everyone at the organization will play a key role in making sure these responsibilities go beyond words in a handbook to real-world policies and procedures that make the nonprofit a great place to work. In practice, this might look like an employee requesting overtime through the right channels or a manager conducting a thorough performance review.

Let’s take a closer look at the responsibilities a nonprofit HR team will typically have on its shoulders:

These are the core tasks and activities of most nonprofit HR departments.

Compensation Strategy

Compensation strategy is an important part of nonprofit HR.

As mentioned above, employee compensation is one of the most important areas of nonprofit HR. With tighter budgets, nonprofit HR needs to take a flexible “Total Rewards” approach to compensation. This encompasses both direct compensation, like salaries, and indirect compensation, like benefits and the quality of your internal culture.

Explore our complete guide to employee compensation for more information. Compensation plays a major role in your organization’s ability to attract, engage, retain, and develop your key talent and team members.

Compensation is a complex topic, and there’s potentially a lot of risk if it’s not handled correctly.  If you’re looking to grow your organization, solve a particular problem, or develop your first concrete compensation strategy, a consultant is your best bet. At Astron Solutions, we specialize in providing HR and total rewards compensation support to small- to medium-sized organizations.

Get more information about Astron Solutions’ compensation consulting services!

Talent Management

Talent management encompasses a number of key nonprofit HR tasks.

Talent management is a fairly broad category that encompasses employee engagement, retention, development, performance management, and more. As an expansive area of nonprofit HR, there are a number of ways that you might handle all or part of your organization’s talent management.

Most organizations today handle their talent management with a mixed solution of in-house staff, software, and consulting as needed.  Check out our complete guide to talent management for more information.

Your own internal HR team, dedicated software to support specific tasks, and overarching strategies developed by a nonprofit HR consultant can be a winning combination of solutions that are sustainable and valuable in the long run.

Compliance & Documentation

Compliance is a critical part of the nonprofit HR department's role.

As mentioned above, compliance is a major responsibility of nonprofit HR, just as it is in for-profit HR departments.

The landscape can be fairly complex, with anti-discrimination regulations, the Fair Labor Standards Act, the Family and Medical Leave Act, social security policies, OSHA requirements, and more all figuring into your requirements as a legally compliant employer. Your HR team will be responsible for maintaining and documenting your organization’s federal, state, and local compliance. 

Again, you can put a lot at risk by attempting to handle all elements of compliance on your own. Working with HR consultants, lawyers, insurance agents, and/or professional-grade online services will be your best bet if you have no experience handling compliance issues for your organization. 

Recruitment & Onboarding

Nonprofit HR professionals also typically handle recruitment and onboarding.

Sometimes lumped into the broader category of talent management, employee recruitment and onboarding is another crucial activity of nonprofit HR professionals. A streamlined, positive recruitment experience, thorough onboarding process, and competitive Total Rewards approach to compensation can make a huge difference for nonprofits that need to hire competitively.

Check out our list of recruitment and retention strategies to learn more.

Organizations have several options for building out or updating their recruitment and onboarding strategies, including working with a consultant or recruitment agency, using online hiring tools and services, and tasking their in-house HR team with refining the recruitment process.

Culture Building

Building your organization's culture is another key task of human resources for nonprofits.

Fostering a collaborative, positive culture in your workplace should be a top priority for any organization, and it can play an important role in making nonprofits more attractive to potential employees. Human resources professionals play a major role in guiding the development of an organization’s internal culture and gauging employee engagement and satisfaction.

As mission-driven organizations, nonprofits can benefit greatly from developing a rich, mission- and teamwork-centric culture, and their HR teams are the professionals who typically guide that process in a number of ways. Designing and implementing an employee recognition program, for example, is an important way that nonprofit HR can help build their organization’s culture. 

In-house HR professionals or nonprofit HR consultants can help evaluate the current state of your culture and develop long-term strategies for strengthening it in the future.

Payroll & Taxes

Managing your organization's payroll and employment taxes is an important part of nonprofit HR.

Handling your nonprofit’s payroll and taxes is one of the most essential responsibilities that your HR team might take on. Ensuring timely payroll and related compliance around employee classification, tax withholdings, insurance coverage, and other benefits is crucial for smooth operations at your nonprofit.

Someone at your organization will also need to be responsible for submitting your annual Form 990 to the IRS

Your organization’s HR team or financial professionals might fully handle payroll and taxes internally, although this can be a logistical challenge for smaller nonprofits. Talent management software and online payroll services are effective alternatives for streamlining and automating your payroll management.

Volunteer Management

Nonprofit HR is also often in charge of managing your volunteer program.

As mentioned above, volunteer management is one of the major differences between the responsibilities of nonprofit and business HR departments. Large nonprofits might have a dedicated individual or team to handle volunteer management and programming, but for small- to mid-size organizations, these responsibilities often fall to human resources.

Strategic and deliberate volunteer management can go a long way to boost your volunteer engagement and retention rates.

There are software solutions designed to support volunteer management and tracking, but it’s best to also have an in-house team member oversee your program.

Getting Started with Nonprofit Human Resources

As discussed with each of the core HR responsibilities described above, there are a number of ways that nonprofits can get started with any one or all of them. For new nonprofits, it can be easy to put off developing HR policies or implementing necessary HR tools until it’s too late, so it’s important to be aware of your options. 

Nonprofit HR support and services typically fall into one of three categories:

This graphic lists the three ways to get started with nonprofit HR, which are covered in detail in the text below.

Your In-House HR Team

Smaller organizations might not have the resources yet to support a dedicated HR professional or team, but that should certainly be a long-term goal, particularly as your nonprofit grows. 

An HR Consultant with Nonprofit Experience

An HR expert can provide your organization with specialized support and a custom strategy perfectly tailored to your needs. Working with an HR consultant can be a smart move for organizations that are building out their first sets of HR policies and procedures or for nonprofits that need support solving specific issues.

If you think working with a consultant might be the best move for your organization, check out our guide to the consultant hiring process. It walks through the reasons why organizations work with HR consultants, what exactly a consultant can do for your organization, and steps for getting started with the research and comparison process.

External HR Services and Tools

Outsourcing most or part of your HR needs to a third-party HR service is an increasingly common option. This category encompasses both full-service remote human resources support and individual web-based tools and services to handle specific needs, like payroll.

Now, you might be wondering: when should a nonprofit outsource its HR?

Outsourcing part of your HR needs is often a good idea for smaller organizations for a few reasons. However, there are always important considerations to make, especially around responsibilities as critical as compliance and payroll. 

Consider these common pros and cons to outsourcing your nonprofit’s HR:

There are some key considerations to make around outsourcing your nonprofit HR tasks.
  • Pros: Outsourcing part of your HR needs to a consultant or service provider can fill gaps in your in-house coverage, make your processes more efficient, improve buy-in from leadership, provide objective opinions, and help you avoid major risks like non-compliance.
  • Cons: Alternately, HR consultation or a third-party service can potentially be quite costly. There’s also always a chance that their strategies will be misaligned with your organization’s goals or that they’ll open you up to new potential risks.

Check out our longer guide to top HR consulting firms and services for an idea of the range of options out there. These top picks are geared towards small businesses, but their tight budgets and small teams mean their needs are relatively similar to those of nonprofits.

Wrapping Up

Incorporating effective human resources tasks into your nonprofit’s operations will allow you to prepare your nonprofit for long-term success. Having a strong, mission-driven team of employees translates to a stronger overall community of support for the cause you’re championing.

In other words, when employees’ needs at work are met and they are satisfied in their jobs, they can better deliver your mission to your beneficiaries, connect with donors, garner support for your work, and more.

Additionally, effective HR processes are essential for your organization to stay compliant with local, state, and federal regulations. Nonprofits are employers, too! And human resources is typically the department that ensures everything people-related can continue operating smoothly, especially when it comes to compliance and payroll.

Your nonprofit needs HR structures in place, regardless of its current size, and your team should know to look for external support when it’s needed. Trying to handle all of your human resources tasks on your own and doing it incorrectly can potentially create huge risks. So, don’t put off getting started!

Want to continue learning about the world of HR? Here’s some recommended reading, hand-selected by the Astron Solutions team:

Click through to learn how Astron Solutions can help your nonprofit manage its human resources.

More to explore:

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