Table of Contents

Table of Contents

HR is similar across industries, but nonprofit HR has its own unique benefits and challenges. This article discusses those challenges and offers advice and solutions a nonprofit HR person might encounter. Read on to learn more!

What Is Nonprofit HR?

Nonprofit HR is human resources for nonprofit organizations. Instead of focusing on a product or service for profit, a nonprofit organization focuses on delivering a service for someone (or something) else’s benefit, such as an environmental organization, a community mental health agency, a membership organization/society that publishes scientific research, a charity, or innumerable other similar workplaces that are mission-driven.

Although HR is similar from one industry to another, nonprofit HR is not the same as HR in a for-profit company or even a governmental organization or agency.

Nonprofit vs For-Profit

Nonprofits differ from for-profit businesses in several ways. One of the most important differences is the way they receive funds. For-profit organizations collect funds from investors, who then receive a share of the profits. Nonprofits ask for donations, and those who donate never receive money in return. Because nonprofits often have less funds to spend, they mainly operate through volunteer efforts, with not many paid employees. Of course, the opposite is true for for-profit companies; aside from the occasional unpaid intern, people are paid for the work they do.

Another difference is that nonprofits receive special tax benefits that don’t apply to for-profit organizations. To maintain their tax-exempt status, nonprofits must fill out forms about their financial and business practices that for-profit businesses don’t need to fill out.

The Importance of HR for Nonprofits

All employers are subject to federal and state labor laws, so if you employ people, you need HR. If your team is small, an HR consultant can help get your organization on the right track for a fraction of the cost to hire a full-time staff person. You might also consider hiring a part-time HR professional to ensure compliance with relevant staffing-related laws.

  • Labor law compliance. All employers, even those with only a few employees, are subject to federal and state labor laws, including the Fair Labor Standards Act, minimum wage laws, equal pay acts, taxation laws, and more. As staff counts increase, employers become subject to more laws at headcounts of 15, 20, 50, and 100.
  • Confidentiality and separation of duties. Many functions of HR, including aspects of pay, benefits, disability, family situations, etc. involve employees’ private information. Having a dedicated HR professional who understands the ins and outs of confidentiality helps build trust and keep your organization out of legal hot water. Many small nonprofit organizations hire an office manager or administrative assistant and assign HR functions to them, but if they are not trained in handling private and confidential information or exercising judgment and discretion, it can lead to many issues, including legal ramifications. It also helps to have someone “in house” who can work directly with employees on issues around pay, benefits, and workplace dynamics.
  • Strategic partner. As discussed in more depth below, nonprofits carry a unique set of challenges. A skilled HR professional can help all levels of the organization, from executive director to entry-level staff member, navigate the workplace with more ease, greater efficiency, and increased success.

What’s the Role of HR at a Nonprofit?

Much like HR in other industries, the role of nonprofit HR is to strategize, develop, shepherd, advise, and execute all of the employee-related best practices relevant to the organization. Some of the key nonprofit HR roles are:

Organizational Partner

In a nonprofit environment, HR has a unique opportunity to dive in as a partner to leadership and staff. They must understand the organization’s mission and values, finances, practices, and processes, etc., in order to help the organization function at its best. The HR professional helps leaders think through dynamic and flexible staffing models, best practice benefits, organizational culture, and much more.

Responsibilities include: 

  • Knowing (and working towards) the company’s vision and goals
  • Developing a human resources strategy to guide the company
  • Helping business leaders create staffing models
  • Implementing HR best practices across all areas
  • Measuring HR effectiveness and adjusting practices as necessary
  • Building a strong workplace culture

Hiring and Onboarding

While many nonprofits rely heavily on volunteer work, there will also be paid employees who work more regularly to keep the organization running. HR is responsible for hiring and onboarding these employees. Hiring and onboarding both make a lasting impact on a company—a good hiring process makes sure that the best person gets the job, and a solid onboarding experience makes it more likely that they’ll stick around. 

Responsibilities include: 

Compensation and Benefits 

HR can play an important role in determining the compensation that employees receive.

Whether it’s an hourly wage or a salary, it’s important that companies have a well-defined plan about how to pay their employees. It might seem simple at first glance, but there are lots of factors to consider: how to account for the cost of living in different areas, what the job market looks like, and what other industries are paying. HR can analyze these things to determine a pay structure that will attract and retain workers. One thing to note: nonprofits must abide by minimum wage laws, but there’s also an upper limit to what employees (including executives) can be paid. If anyone exceeds the limit, the organization risks losing its tax-exempt status. 

In addition to pay, benefits play a huge role in an employee’s decision about where to work. Because nonprofits may not have the resources to offer competitive salaries, benefits can be the tipping point for whether someone wants the job or not. Human resources professionals help determine what benefits the nonprofit can afford to offer, as well as what benefits people at the organization most want.

Responsibilities include:

Policies and Compliance

Like any business, nonprofits will need to have policies governing things like time off, overtime, leave, health and safety, dress code, drug and alcohol use, and the list goes on. HR not only helps create these policies, but also helps enforce them and, if necessary, takes disciplinary action against those who break them.

HR also plays an important role in maintaining compliance with state and federal laws. Since nonprofits have specific requirements that don’t apply to for-profit organizations, HR should take the time to become familiar with these standards. 

Responsibilities include:

Culture Champion

Organizational culture is set by leadership, not HR, but HR professionals help shape and drive culture. Bringing forward best practices around work-life balance, shared values, responsive HR customer service, employee training and development, etc. are all key parts of workplace culture, and HR is perfectly positioned to make big impacts in these areas.

Further, HR will likely lead DEIB (Diversity, Equity, Inclusion, and Belonging) at the organization. This incredibly important work sets the tone for interactions with historically excluded or underrepresented volunteers and/or employees. This “culture champion” role is absolutely critical.

Responsibilities include: 

Employee Relations

Every workplace has organizational dynamics, politics, and interpersonal conflicts that can either reduce performance and efficiency or transform these dynamics into something useful and valuable. How HR guides others in handling and responding to conflicts can determine whether the conflict is ignored, feared, and avoided, which can lead to resentment and hostility, or embraced and respectfully engaged, which leads to a culture of candor and trust. To learn how to do this well, try shadowing successful HR professionals (see below about building a network) to get a feel for how to approach different situations.

A nonprofit HR professional also acts as a trainer, ensuring that staff are taught basics like anti-discrimination, anti-harassment, and workplace values. This helps staff understand what is expected in their interactions with others.

Responsibilities include: 

  • Resolving workplace conflicts
  • Putting a stop to workplace bullying
  • Maintaining workplace safety
  • Ensuring that employees are paid accurately and on time
  • Advocating for employees to be paid fairly
  • Communicating with employees who are displaying problematic behaviors 
  • Recognizing employees for what they do well

Volunteer Manager

A major difference between for profit businesses and nonprofit ones is that nonprofits often have help from volunteers. Because these volunteers care about the cause the nonprofit stands behind, they’re willing to freely give their time and effort. While some nonprofits choose to have an entire department dedicated solely to volunteer management, many rely on HR to fulfill this responsibility.

Just as HR must foster employee engagement to drive retention efforts, they need to help volunteers stay engaged with the work they’re doing. 

Responsibilities include: 

  • Recruiting, onboarding, and training volunteers
  • Managing conflict between employees and volunteers
  • Recognizing and rewarding volunteers for jobs well done

Coach and Cheerleader

Many managers (people who supervise others) have never received formal supervisory training, and many are uncomfortable giving feedback, assessing performance, completing evaluations, dealing with conduct issues, etc. The HR professional is prepared to offer coaching on these topics and guide supervisors accordingly.

Likewise, employees and supervisors are often focused on the day-to-day and overlook personal growth and development, risking eventual dissatisfaction and disengagement. Nonprofit HR can help staff and their supervisors focus on growth trajectories, skills/experience gaps, and needed support.

Responsibilities include: 

Specific Challenges Within Nonprofit HR

While HR is fairly similar from one industry to the next, there are some challenges unique to HR in nonprofit environments. It’s important to know what those challenges are, and how to work with them to maximize effectiveness.

Limited Budgets

Unlike most large corporations, many nonprofits need to keep budgets low, and spending in one area means pulling back in another. HR gets hit particularly hard here because it’s often seen as a “cost center” where salaries and benefits live. There’s no “one size fits all” solution; creativity is the best way to work around a limited budget.

Here are some creative examples to real-life budget challenges:

No dedicated funding to attend that HR conference? Try crowdsourcing funds from internal departments in exchange for bringing back solutions to specific problems. No budget for wellness programs? Try organizing free lunchtime walking groups, or create a recipe-sharing Google drive that everyone can contribute to. No money for team building? Play Bingo or Pictionary (or better yet, virtual werewolfGoogle it!) using free online software. There’s a creative solution to every challenge.

Few Staff, Many Hats

Because budgets are restricted, staffing often works on a skeleton crew basis—just enough staff to steer the ship and no more. For HR, this means wearing many hats. At a small nonprofit, the HR professional might run payroll and administer benefits, handle employee relations, conduct training, order office supplies, plan the annual holiday party, fix the printer, and more. Potentially without access to legal counsel, tax professionals, or others who have specialized knowledge, they can dive into learning it themselves ( see “Flying Solo” below). For someone wanting to specialize in one functional HR area, nonprofit HR probably isn’t ideal. Nonprofit HR is best for the generalist who wants to have their hands in a bit of everything.

Recruitment, Retention and Staff Management

These are two important areas for any HR generalist, as the limited budgets and low staffing of nonprofit environments can make these functions more difficult. Fighting for talent is challenging anywhere, but with lower-than-average salaries, it’s an uphill battle to attract good candidates. Likewise, retention is a challenge where there is limited growth potential and fewer opportunities for development. Many nonprofits rely on time-limited grants to fund projects, which means scaling staffing up and down as needed. Additionally, many nonprofits employ volunteers and interns who are often uncompensated but still need to be managed in line with relevant labor laws.

In the absence of robust compensation and advancement, the best way to attract and retain great staff is to focus on building and selling the culture. Many nonprofits attract candidates by promoting the mission and relaxed atmosphere and then retain staff by “compensating” with better work-life balance, more flexibility, and less corporate environment. While corporate employers may pay more, the exchange might be longer hours, less camaraderie, fixed schedules, and so on. The HR professional helps build out the culture and then sells it to candidates.

Flying Solo

As the nonprofit HR is often called a “department of one,” the HR professional will frequently report directly to the head of finance and/or operations. Additionally, since nonprofits are usually small, creating and maintaining professional friendships within the organization can be difficult. Cultivating a network of other HR professionals can help personally and professionally, providing resources and support for questions, sample policies or best practices, etc.

As just one example, HR Mavericks is group of HR professionals who freely share knowledge, answer each others’ questions on Slack, and help create HR resources.

Learn more about HR Mavericks and join for free here

Best Practices for HR in Nonprofit Organizations

Now that we’ve gone over some of the main responsibilities of HR in nonprofits—and some of the challenges involved—let’s take a look at three general best practices. 

Develop a Needs-Based Recruiting Plan

As discussed previously, nonprofits face some unique challenges when it comes to recruiting. Because hiring can be challenging, it’s important to have a plan in place before starting the hunt for talent. Analyze what your organization needs in its people, considering their skills, qualifications, experience, and how they’ll fit into the culture. Develop a standardized process to fairly evaluate candidates and make hiring decisions.

As you post jobs and reach out to candidates, talk your company up by emphasizing your great benefits, positive company culture, and valuable mission.

Onboard Effectively

For both employees and volunteers, effective onboarding can make all the difference in engagement, effort, and productivity. As you onboard new hires and volunteers, make sure that they receive the training and support they need to know how to fulfill their responsibilities. You might consider assigning onboarding buddies so that people can become familiar with their duties more quickly—and have a peer they can lean on for support. 

Provide Development Opportunities

Whether they’re getting paid or not, everybody wants to feel like they’re contributing to the fulfillment of a larger goal. Providing chances for people to develop their skills and step into new roles can help with retention. When they feel like they’re progressing and being challenged, they’ll be less likely to start hunting for a new job or volunteer opportunity. 

Employees can move into positions with more responsibilities, eliminating the need to hire externally for those positions. Volunteers can also be trained over time to take on additional responsibilities.

As you train people and watch them progress in the organization, remember the importance of feedback. Providing feedback shows that you care and are willing to support people as they develop.

When to Hire an HR Professional for Your Nonprofit

When you’re approaching 50 employees, it’s probably time to hire an in-house HR professional. But if budget allows, hiring an HR pro even sooner than that can positively impact your nonprofit. With some human resources expertise, you’ll hire more qualified people, attract and retain engaged volunteers, stay up-to-date on laws and regulations, and more. 

If you’re hiring an HR professional for the first time, consider hiring an HR generalist with expertise in all areas of HR. Indeed provides sample job descriptions that can give you some ideas about what to write on your job description

How Eddy Can Help Simplify Your HR Processes

While the big-picture vision of nonprofits drives everything they do, administrative tasks often take up time behind the scenes. Eddy is an all-in-one HR software that automates many of these administrative tasks, giving nonprofit owners and HR more time to devote to the big picture.

With Eddy People, you can track time and PTO, easily onboard new hires with digital document signing and custom task lists, securely store employee information, and more. Eddy also provides hiring and payroll solutions that help companies find qualified applicants and stay compliant. 

Learn more about how Eddy can simplify your HR processes

Questions You’ve Asked Us About Nonprofit HR

Nothing and everything. HR fulfills the same role and functions for both, but nonprofits have specific challenges, including reduced budgets, lower staffing numbers, recruitment and retention challenges, and more. However, they also offer a different growth path for HR professionals who want to work more holistically and develop in all key areas of HR.

If an organization employs people, it needs HR to ensure compliance with relevant federal and state labor laws. Consider outsourcing if the organization is too small to justify a full-time hire.

Tammi has 8+ years of progressive HR experience in a variety of industries and settings, including nonprofit and higher education. She believes that doing HR well means being a true partner and collaborator with every part of an organization, and by saying “yes” to creative problem solving wherever and whenever possible (and legal). Her favorite work includes diversity, equity, inclusion, and belonging (DEIB); the how and why of hiring and retaining great people; helping to sustain an organizational culture of trust, empathy, and candor; and anything else that prompts employees to say they love where they work. In her free time, you can find her wandering outdoors, studying clinical herbalism, tinkering in the kitchen, dismantling the patriarchy and white supremacy, and hanging out with her cat, Emily Dickinson.

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