Human Resources in the Nonprofit Industry: Key Roles, Challenges, & Strategies

Nonprofit HR operates where passion meets practicality, and it's more complex than it appears. You're working with dedicated staff, committed volunteers, and part-time employees who often have other obligations. While everyone shares the same passion for your cause, each group requires a different management approach.

Regulations shift, resources stretch, and expectations remain high despite limited resources. HR for nonprofits can't simply adapt corporate best practices. Instead, you need tailored HR services for charities that honor your mission and your people's needs.

What Is Nonprofit Human Resources?

Nonprofit human resources refers to the department that manages employee and volunteer relationships within not-for-profit organizations. It covers the usual hiring, payroll, and compliance work but with the added nuance of grant terms, constrained funding, and the challenge of encouraging staff and volunteers.

Unlike for-profit human resources teams, nonprofit HR blends business practices with a collaborative culture that's rooted in service and impact. Megan Burdett, Talent Enablement Partner at Paychex, explains: “Nonprofit HR is about walking a tightrope between corporate risk management and community-driven service. Just because someone is a volunteer doesn't mean the rules don't apply. Things like job descriptions, consent forms, or even age requirements become critical — because grey areas can get real risky, real fast.”

Nonprofit vs. For-Profit Human Resources

Though it may look alike on the outside, not-for-profit HR teams must also consider where the funding comes from and what the group is trying to achieve.

HR in nonprofit organizations typically work with:

• Grant-Dependent Staffing: Positions often hinge on specific funding cycles, creating uncertainty around long-term HR strategy planning.
• Volunteer Coordination: It takes different strategies to keep unpaid team members engaged and coming back.
• Compensation Strategies: When you can't offer top salaries, you sell candidates on the mission, growth, flexibility, and culture.
• Lean Staffing: Nonprofits often operate with small HR teams — or sometimes just a volunteer coordinator who's also the bookkeeper. To bridge the gap, some turn to charity HR services. Burdett cautions, “While it can be tempting for nonprofits to want to rely on volunteer help or a bookkeeper for HR, it's not a smart move. In this space, anyone tied to your mission can also become your liability.”
• Compliance and Documentation: Beyond standard labor laws, nonprofits must comply with specific regulations, including annual IRS filings like Form 990 and rules tied to grant usage.
• Financial Constraints: Cost limitations and skeleton crews create compliance risks while making competing with better-funded employers for talent nearly impossible.

For-profit HR generally operates with:

• More Predictable Funding: Resources for HR tools, training, and competitive salaries are typically more stable.
• Strategic Workforce Planning: Hiring decisions focus on profitability and growth rather than grant requirements.
• Employee-Only Focus: No need to balance volunteer management with traditional employment practices.
• Market-Rate Compensation: The ability to compete directly on salary and comprehensive benefits packages based on compensation benchmarking.
• Specialized HR Roles: Larger teams often allow for dedicated recruiters, benefits specialists, and compliance officers.

Core HR Responsibilities in Nonprofit Organizations

Managing human resources for nonprofits is about laying a foundation that lets passionate people do meaningful work and do it well. A strong approach to human resources in nonprofit organizations promotes an environment where staff and volunteers feel valued and like they belong.

Strategic HR Planning

Nonprofit HR professionals work closely with leaders and boards to make sure staffing, structure, and culture reinforce the mission. It also involves anticipating the ebbs and flows of grant funding, helping leadership decide when to expand teams and when to get creative with existing resources.

“Strategic HR in a nonprofit isn't about managing grant cycles or deciding when to hire. It's about building airtight processes that protect the organization when things get messy, because they will. Every activity, every person involved, whether a member of the community that showed up to benefit from the cause, or a paid/unpaid volunteer, comes with risk. If the processes aren't solid, the mission isn't safe.”
Megan Burdett | Talent Enablement Partner at Paychex

Recruitment and Talent Management

Nonprofits are struggling to fill positions. HR teams in this environment must master mission-driven recruitment strategies on tight budgets and competing against better-funded employers while finding candidates who believe in the cause.

Burdett adds, “Most nonprofits aren't tapping into the full power of the communities they serve. Companies with paid volunteer hours, local schools, faith-based groups like churches, and all untapped pipelines for talent.” She warns that if a nonprofit’s talent strategy doesn’t include creative partnerships and a modern approach to sourcing, they’ll keep recycling the same small talent pool — and risk burning out the few who say yes.

Volunteer Management

Successful nonprofit HR teams know that volunteers need clear objectives and consistent communication just like paid staff, but with approaches based on their availability and what motivates them. Volunteer recognition helps them feel valued, turning them into powerful advocates for the organization and natural recruiters for future talent.

Burdett highlights the importance of setting clear boundaries for volunteers — an area that often goes undiscussed. “Volunteers need to understand exactly what they can and cannot do, how to escalate issues, and the difference between their role and that of a paid employee,” she explains. “Too many organizations have good job descriptions and recognition programs, but when something goes wrong at an event, it’s suddenly unclear who should act.” Without a clear distinction between staff and volunteers, organizations risk well-meaning individuals stepping into situations they aren’t trained or authorized to handle — a major liability.

Compensation & Benefits

Nonprofits may struggle to compete on salary alone. Fortunately, candidates who are motivated by purpose often value work-life balance and growth opportunities over salary. Affordable employee benefits, flexible schedules, career development, and recognition programs help attract talent when your base salary can't match corporate-level funding.

Even small benefits need to be visible, valued, and clearly communicated — both in job postings and internally. Burdett explains that creative strategies also matter, “Tap into part-time help for weekend events, especially those that may have a full-time job during the week and are looking to make a few extra bucks on the weekend. In addition, it's always good to explore community partnerships that can support the staff, whether it's bartered services, discounts, etc.” When nonprofits can’t match corporate funding, they need to outmatch it with alignment, agility, and authentic connection.

Policy Compliance

While you're managing OSHA safety standards, Fair Labor Standards Act requirements, and HIPAA protections like any employer, all nonprofits must also submit IRS Form 990 each year. HR policies for nonprofit organizations operating in multiple states must also wade through charitable registrations, authority certificates, and employment rules that vary from state to state. Policy and compliance in a nonprofit can be complex, covering everything from background checks and volunteer agreements to reimbursement policies and donation tracking.

Culture & DEI

Not-for-profit human resources can establish welcoming workplaces through diversity, equity, inclusion, and belonging (DEIB) training, leadership coaching, and values alignment into everyday practices.

However, recent federal rollbacks of DEI programs across government agencies and cuts in related grant funding may force nonprofits to depend more on internal resources and private funding.

Employee and Volunteer Relations

Building strong relationships between staff, volunteers, and leadership requires communication, meaningful feedback, and acknowledging everyone's unique contributions. When seasoned employees leave, it often means losing years of community relationships, institutional knowledge, and the trust that beneficiaries have built with specific team members. Burdett emphasizes the importance of documentation and states, “No one should be an island, and no one should be allowed to treat the mission as their personal property. This isn't anyone's baby, it's a nonprofit. The relationships should belong to the organization, not an individual. Otherwise, the mission walks out the door when a person resigns.”

HR connects the dots by keeping communication flowing, heading off conflict, and helping prevent burnout and turnover.

Top 5 Best Practices for Nonprofit HR Success

A healthy nonprofit culture is like a campfire. It takes care to build and constant tending, but when it's going strong, everyone wants to be near it. These nonprofit human resources best practices can help keep that fire burning, even when resources are limited.

1. Center Recruitment Around Mission and Values

Instead of generic job descriptions that could apply anywhere, lead with your mission, be honest about challenges and rewards, and focus on finding candidates who'll succeed in your specific environment rather than just meeting basic qualifications.

Recruiting is especially important in a nonprofit, “There's less room for error. The right candidate isn't just aligned with the mission, they're equipped. Prioritizing communication skills, de-escalation techniques, partnership mindset, and emotional intelligence is always beneficial,” adds Burdett.

2. Streamline Onboarding for Staff and Volunteers

People need to get up to speed quickly and understand how their work connects to your bigger picture. Well-designed onboarding cuts early turnover while building a commitment that keeps people engaged long-term.

When it comes to onboarding, emphasis should be placed on:

• How their work connects to the mission and day-to-day operations
• What they can and cannot say/post (especially with a federally funded organization)
• How to escalate concerns or problems
• What documentation is required and where it lives
• How their behavior, even as a volunteer, can legally or reputationally expose the organization

3. Use Flexible Benefits To Boost Retention

You might not win salary wars, but work-life balance and employee development can tip the scales in your favor. Simple, heartfelt recognition goes a long way without going beyond your spending limits.

4. Invest in Staff and Volunteer Development

Growth opportunities are often more valuable than salary increases for mission-driven staff. When your team grows their skills, they're more energized, and your whole organization benefits.

Burdett emphasizes that when it comes to investing in people within nonprofits, it should be treated differently and with an intentional approach. “People don't join nonprofits for the paycheck typically, they join because they want to be a part of something bigger,” she explains. However, this doesn’t mean staff and volunteers should be treated the same. They serve different roles and need tailored development opportunities. Staff should have access to leadership growth, communication training, and a deeper understanding of how the organization functions and how their role supports the mission. Volunteers also need training, but with a focus on boundaries, role clarity, and safety. As Burdett puts it, “Volunteers support the mission, but staff sustain it.”

5. Automate Processes With the Right HR Tools

Manual payroll processing and compliance tracking can take time you don't have. HR tools for nonprofits, such as HR automation, take care of routine tasks so you can focus on strategic work that advances your mission.

Overcoming Common Challenges in Nonprofit HR

Every nonprofit HR professional knows that familiar feeling of being asked to work miracles with minimal resources. It's like building the plane while flying it, except the parts depend on this year's grant cycle. Here's how to get off the ground.

Budget Limitations

For nonprofits, shoestring budgets aren't unusual — they're the everyday reality. You may not be able to compete on salary or offer perks like large employers can. Still, nonprofit HR can deliver value by offering flexible work policies, meaningful recognition, transparent communication, and benefits like mental health support.

Small HR Teams

In many nonprofits, HR isn't a separate department — it's one person handling hiring, onboarding, payroll, and compliance on top of other admin work. This type of setup isn't sustainable long-term. Outsourcing tasks like payroll processing or compliance audits can free up time and reduce errors while remaining financially manageable.

Managing Unpaid Volunteers Alongside Staff

Volunteers are essential to most nonprofits but managing them alongside staff requires extra coordination. Guidelines must be clear and consistent so that everyone understands their role. HR in nonprofits can help by developing simple volunteer handbooks, offering basic training, and setting up check-ins or feedback systems.

High Turnover Due to Burnout and Limited Advancement

Talent retention in nonprofits is especially tough when growth potential is limited and development opportunities are scarce. HR can strengthen organizational sustainability by setting realistic standards, offering flexible roles, and building opportunities to promote staff engagement and burnout prevention.

Compliance Burdens With Minimal Legal Resources

From labor laws to IRS filings to grant-related reporting, compliance doesn't get any easier, but you can manage compliance risks without hiring expensive attorneys for every question. Professional association memberships pay for themselves through compliance updates and template resources, good HR software automatically tracks regulatory deadlines and changes, and regular policy reviews can help maintain standards.

Short-Term Staffing Due to Grant Cycles

Many nonprofits rely on short-term grants to fund projects, which means scaling staffing up and down as funding shifts. Stay in touch with great candidates who understand how grant cycles work, as they may be first in line when new funding opens up. It also helps to focus on knowledge transfer processes to minimize the loss of institutional knowledge as people cycle through grant-funded positions.

When To Bring in HR at a Growing Nonprofit

Nonprofit leaders often reach a tipping point when they can no longer manage HR tasks alongside their other responsibilities. Here are the clear signs it's time to invest in dedicated HR services for nonprofits, whether through hiring internally or exploring outsourced HR for nonprofits.

• Approaching 50 Employees: Managing many employees requires systematic processes that can take significant time to develop and maintain.
• Increasing Compliance Complexity: Federal requirements like the Family and Medical Leave Act (FMLA), multiple state regulations and registrations, grant-specific employment obligations, and changing labor laws creates compliance burdens where errors are far more expensive than proper HR guidance.
• Rising Volunteer Engagement Needs: Poor volunteer experiences damage your organization's reputation in the community and make future recruitment significantly more difficult.
• Repeated Retention Challenges: If you're struggling with turnover or can't fill positions, expert HR insight can identify culture, workload, or advancement issues that may not be obvious internally.
• Leadership Strain: Your executive director was hired for big-picture thinking, not to get bogged down in benefits paperwork or HR issues.