Understanding Nonprofit HR: What Sets It Apart?

As a smaller organization, perhaps your nonprofit started with just you. You were the executive director, development officer, marketing manager, and HR department, all rolled into one. But over the years, you started picking up steam, first hiring three employees, then ten, 30, maybe even 50.

If you’ve experienced this type of growth with your organization, you’ve probably realized that your nonprofit could benefit from a comprehensive HR framework. 

There’s a misconception that HR departments are just meant for the for-profit business world, but that’s not the case. After all, your nonprofit is practically run like a business. Instead of investors and customers, you run on charitable donations from donors, grantors, foundations, and other sources.

Just like a business, your organization requires talented employees to gather support from various sources and stay in operation. And, you need a department in charge of ensuring those employees are satisfied and prepared to do their jobs well.

In this article, we’ll cover:

• Nonprofit HR vs. For-Profit HR
• Nonprofit HR Essential Duties
• Creating Your Nonprofit’s HR Approach

 
As a nonprofit, your organization requires an HR department that can support your team members as you continue to grow. By understanding the role of HR in your nonprofit, you can determine the best way to structure your HR approach to meet your organization’s needs. Let’s dive in!

Before stepping into the nonprofit sector, you most likely held at least one job in the for-profit world. Therefore, you’re already familiar with the functions and responsibilities of HR departments when it comes to businesses. HR is the department responsible for managing hiring, onboarding, training, and benefits.

All of these facets of corporate HR departments are mirrored in nonprofit HR departments. In addition, nonprofits must comply with the same federal, state, and local laws as businesses regarding the treatment of employees.

However, nonprofit HR departments aren’t completely identical to those in the business world. Astron Solutions’ nonprofit HR guide mentions several features that are unique to nonprofit HR departments:

• Mission-driven nature: Rather than being profit-driven, nonprofits are solely mission-driven. That means their driving purpose is to achieve ongoing goals related to improving society in some way. Nonprofit HR departments are tasked with keeping in mind how their actions support the organization’s overall mission.
• Volunteer management aspect: Nonprofits frequently rely on the support of volunteers to bolster their projects or programs. Therefore, along with managing paid employees, nonprofit HR departments also must figure out how volunteers fit into the daily workload for the organization.
• Project-reliant staffing: Many nonprofits depend on grants and other forms of project or program-specific funding. Because of this, nonprofits tend to be more restricted in how they allocate employees across projects. Alternatively, for-profit organizations can generally choose how they want to distribute work across their team and whether they want to see certain projects through or wrap them up before completion.
• Recruitment obstacles: Nonprofits tend to face a more challenging recruiting environment because they have tighter budgets. This means that they can’t rely just on salary offerings to be able to recruit talented employees. Nonprofit HR teams have to get creative and figure out how to promote other benefits to create appealing offers for prospective employees.

 
You may have noticed that as more and more businesses start to adopt corporate social responsibility programs, the lines between nonprofit and for-profit HR departments are blurring a little. Plenty of businesses are prioritizing leaving a positive social and environmental impact alongside pursuing profits. They’re taking notes from the nonprofit HR playbook to determine how they can foster a purpose-driven environment for employees.

All in all, this means that nonprofit HR departments play essential roles within their own organizations and can act as role models for other types of organizations as well.

You now understand how nonprofit HR departments differ from corporate HR departments, but what do nonprofit HR professionals actually do? What can your HR department handle to help take the pressure off your other staff members?

Here are the essential responsibilities of nonprofit HR professionals:

• Compensation strategy: Figuring out nonprofit employee salaries can be tricky. Nonprofit HR departments must balance managing tight budgets with paying employees a fair, appealing wage. Experts in the field recommend a “total rewards” approach to employee compensation. This approach emphasizes offering employees a holistic set of benefits that include direct compensation as well as indirect benefits such as healthcare, paid time off, retirement plans, work-life balance, and a rewarding internal culture. Your HR department can help create and maintain this balanced compensation strategy.
• Regulatory compliance: Just like all organizations that have employees, your nonprofit’s HR department is responsible for compliance with labor laws. These include the Fair Labor Standards Act, social security policies, OSHA requirements, and all state and local labor regulations. Plus, your HR department will handle any harassment or misconduct issues within your organization. By bringing on an HR professional to handle these tasks, you can be more assured that you’re complying with all legal requirements.
• Recruitment and retention: Your nonprofit’s HR department will help manage all aspects of the employee lifecycle, from recruitment to onboarding and ongoing engagement. When you provide a positive, engaging recruitment and onboarding experience for employees, you can boost employee retention. Your HR department can play a pivotal role in this engagement by keeping tabs on employee satisfaction.
• Fostering culture: HR teams also play a major role in building your organization’s culture. “Culture” is a broad term that encompasses aspects like how your organization handles internal communications and promotes employee satisfaction. It includes activities meant to build a positive workplace environment, such as leading team-building exercises and managing workplace disputes respectfully and professionally.
• Payroll and taxes: This is one of the most essential tasks that your HR department will take on because everyone needs to get paid. HR professionals can handle payroll tasks, as well as insurance coverage and managing other employee benefits.
• Volunteer management: As stated in Re:Charity’s volunteer management guide, the free support of volunteers “helps you take care of administrative duties and pursue your overall mission even with a limited number of paid staff members.” Larger organizations may have a volunteer coordinator or manager on staff whose role is to facilitate the volunteer program. But for smaller or growing organizations, this task might land in the lap of your HR team. HR professionals can spearhead strategic volunteer recruitment and retention efforts to maintain this unpaid support.

 
Like most members of your nonprofit’s team, your HR professionals will wear many hats depending on your organization’s needs. But hiring an HR professional to join your organization ensures that you have at least one person in charge of managing these vital tasks. Without that, you risk some of these responsibilities falling through the cracks.

If you’re interested in expanding your team to include an HR manager or department, your nonprofit has a few options for different approaches you can take. It’s important to assess the choices available to you to find the right solution for your organization.

When it comes to adding an HR framework to your operations, your nonprofit can:

• Create an in-house HR department: If your organization has the resources and time to devote to hiring and onboarding, you can hire a dedicated HR professional to join your team. However, if you’re a small nonprofit, you might not have the bandwidth to bring on a new full-time team member.
• Hire an HR consultant: Hiring an external consultant can be a great way to get your organization started by setting up HR procedures and addressing specific issues. HR consultants can help pilot your nonprofit through a transitional period, implement employee recruitment and retention strategies, manage any work-from-home guidelines, and create a compensation strategy.
• Outsource HR duties: Organizations are increasingly deciding to outsource some or all of their HR responsibilities to external parties. This can help you fill any gaps in your HR offerings and bring in objective, external opinions to enhance your HR strategies.

 
You can even invest in virtual tools to handle aspects of your HR duties, such as payroll. Online tools like Gusto and QuickBooks can help manage functions such as accounting, payroll, and benefits management.

Assess your organization’s budget and priorities to determine what type of HR investment to make. Run a cost-benefit analysis to determine which choice is the most productive and cost-efficient for your nonprofit.

In this analysis, consider which type of HR support your organization would benefit from the most. Do you have the resources and plans in place to bring on a full-time team member? Do you need help refining your HR priorities and goals with the help of a consultant? Or, are there aspects of your HR program that you’d like to outsource to external professionals?

By answering these questions, you can determine the right path for your organization and start gathering the people and resources that will help achieve your HR-related goals.

Many nonprofits find themselves wanting to implement HR policies and procedures after a problem has already arisen. By thinking through your HR priorities and goals before issues emerge, you’ll be better prepared to work through problems while ensuring that your organization stays compliant with all regulations.

Remember, by working with HR professionals such as consultants or third-party experts who have experience in the nonprofit sector, you’ll ensure that your organization has access to nonprofit-specific guidance and strategies.