For nonprofit organizations, human resources should be an essential area of internal operations. Think of it this way — you’re given donations to steward towards a good cause, and your staff and volunteers are the ones who use that support to actually drive your mission forward.
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.
We’ve written before on the topics of nonprofit employee compensation and how to begin working with a compensation consultant. However, nonprofit HR entails much more than compensation, and there are tons of misconceptions out there about what it’s like to work for or direct a nonprofit.
This guide will provide a complete overview of the key responsibilities and broader functions of human resources for nonprofits. Here’s what we’ll cover:
- Understanding the Essentials
- Key Responsibilities of Nonprofit HR
- Getting Started with Nonprofit HR
- The Importance of HR for Nonprofits
We’ll also cover a few top service providers and tools that can help support your efforts around key HR responsibilities. Use the list above to jump to a particular section, or follow along from the top. Let’s get started!
1. Nonprofit HR: Understanding the Essentials
Understanding the basics of human resources will be important as your organization grows. This is because 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.
However, while nonprofit HR and for-profit HR have shared compliance needs, they also differ in a few key ways:
Nonprofit HR vs. For-Profit HR
While nonprofits and other organizations are held to the same employment regulations, their day-to-day HR functions do differ in other ways:
- Their core driving forces. Simply put, nonprofit HR is mission-centric, supporting the organization’s ability to pursue its mission effectively. For-profit HR is more profit-centric, supporting the organization’s ability to operate profitably and efficiently. Fostering employee engagement and retention are 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.
- 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 devoting attention to 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 challenges. 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 in order 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. That is, 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, an emphasis on culture-building and employee engagement, and increasingly flexible compensation strategies are all common nonprofit approaches that are frequently adopted by for-profit HR teams.
2. Key Responsibilities of Nonprofit HR
Next, let’s walk through the key responsibilities that nonprofit human resources professionals typically handle at their organizations.
Let’s walk through each area in greater detail, including the different ways that nonprofits might handle or support them.
Compensation Strategy
As mentioned above, employee compensation is one of the most important areas of nonprofit HR. This encompasses both direct compensation, like salaries, and indirect compensation, like benefits and the quality of your internal culture. Compensation plays a major role in your organization’s ability to attract, engage, retain, and develop your key talent and team members.
With tighter budgets, nonprofit HR needs to take a flexible “Total Rewards” approach to compensation. Explore our complete guide to nonprofit employee compensation for more information.
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. Here at Astron Solutions, we specialize in providing HR and compensation support to small- to medium-sized organizations.
Talent Management
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 software 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
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 legal employer. Your HR team will be responsible for maintaining and documenting your organization’s federal, state, and local compliance.
Handling harassment and misconduct issues at your organization is another key compliance responsibility of HR.
Again, you can put a lot at risk by attempting to handle all elements of compliance on your own. Working with HR consultants or professional-grade online services will be your best bet if you have no experience handling compliance issues for your organization.
Recruitment & 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 longer 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
Fostering a collaborative, open culture in your workplace should be a top priority for any organization, and it can play an important role in making nonprofits attractive employers for talent. 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. Handling internal communications, for example, is an important way that nonprofit HR can help to build their organization’s culture.
In-house HR professionals or nonprofit HR consultants can help to evaluate the current state of your culture and develop long-term strategies for strengthening it in the future.
Payroll & Taxes
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. Today’s talent management software and online payroll services are effective alternatives for streamlining and automating your payroll management.
Volunteer Management
As mentioned above, volunteer management is one of the major differences between the responsibilities of nonprofit HR and human resources at businesses. 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.
3. Getting Started with Nonprofit HR
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:
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.
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 that have arisen.
If you think working with a consultant might be the best move for your organization, check out this guide. 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:
Outsourcing part of your HR needs to a consultant or service 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 noncompliance.
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.
4. Wrapping Up: The Importance of Nonprofit HR
To recap, human resources for nonprofits is a fairly expansive area of tasks, many of them critical to the ability of your organization to continue operating in both the short- and long-term.
In the long-term, concrete, actionable HR policies and procedures will set your nonprofit up for success. A strong, mission-driven internal culture will help to bolster your employee engagement and retention, essential for sustainable growth.
In the short-term, effective HR processes are essential for your organization to stay compliant with local, state, and federal regulations. Nonprofits are employers just like any other type of organization, 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.
If you’re unsure of what exactly you need or how to get started, reach out and ask us. We’ve worked with nonprofits and small businesses of all shapes and sizes, and we can help point you in the right direction.
Be sure to continue your research with a few additional resources, too:
- Nonprofit Employee Compensation: Understanding the Essentials. Compensation is a foundational part of how your organization fits together and actually gets work done. Learn the basics with our guide.
- Top Nonprofit Consulting Firms by Re:Charity. If you choose to hire an outside expert, make sure to find a candidate with experience working with nonprofit organizations.
- HR Functions and Outsourcing. Learn more about HR outsourcing and the options available to your organization with our quick guide.
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