HR Policies for Nonprofit Organizations and How They're Different

HR Policies for Nonprofit Organizations and How They’re Different

Nonprofit organizations often operate with limited resources, volunteer-based teams, and a mission-driven culture. That can make HR management particularly challenging.

Understanding how HR policies for nonprofits differ from those at for-profit entities is key to ensuring compliance, maintaining a positive workplace culture, and aligning with your organization’s mission.

This guide from Mosey explores the unique challenges that nonprofits face in crafting HR policies, shares best practices for compliance, and provides actionable insights for nonprofit leaders. With Mosey, you can manage state compliance with confidence.

Why Do HR Policies Matter for Nonprofits?

HR policies are a framework that helps organizations manage employees and volunteers while complying with federal, state, and local laws. For nonprofit organizations, HR policies must also reflect the organization’s values.

Clear policies should fulfill four important goals:

Ensure Compliance: To maintain their tax-exempt status, nonprofits must comply with labor laws, tax regulations, and nonprofit-specific rules.
Foster Transparency: Written policies provide consistent guidelines for hiring, compensation, and workplace behavior.
Protect the Organization: HR policies help mitigate risks like wrongful termination claims or discrimination lawsuits.
Support Mission-Driven Culture: HR policies tailored to a nonprofit’s mission can inspire employee and volunteer commitment.

Nonprofits often work to serve people, and serving people starts within your workplace. Your policies should demonstrate that you value and strive to protect everyone who contributes to your mission.

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What Are the Key HR Differences Between Nonprofit and For-Profit Companies?

Nonprofit HR policies differ from those at for-profit organizations in several ways. That’s because of their unique operational and legal status:

Tax-Exempt Status

Nonprofits must maintain their 501(c)(3) tax-exempt status, ensuring that executive compensation, resource allocation, and operational activities align with the organization’s mission. Overpaying staff or engaging in unrelated business activities can lead to IRS scrutiny or auditing.

Volunteer Management

Unlike for-profit businesses, nonprofits rely heavily on volunteers. To avoid misclassification, your policies must address volunteer recruitment, training, and behavior while distinguishing between volunteers and full-time employees.

Resource Constraints

Nonprofits typically have tighter budgets, which can impact compensation, benefits, and training opportunities. HR policies must balance the fair treatment of their employees with their organization’s financial reality.

Mission Alignment

Every decision a nonprofit makes, including its HR policies, must align with its mission. This requires policies that emphasize ethical behavior, transparency, and commitment to the cause.

What HR Policies Are Essential to Nonprofits?

Nonprofits are subject to many of the same requirements as for-profit organizations. Still, there are important differences and unique compliance requirements that may impact a nonprofit’s approach to human resources:

A Comprehensive Employee Handbook

An employee handbook should outline expectations, benefits, and procedures. For nonprofits, your handbook should emphasize your organization’s mission while detailing key policies and requirements.

These include:

Performance Expectations: Clearly define roles, responsibilities, and evaluation criteria.
Code of Ethics: Outline expectations for integrity, transparency, and accountability for employees and volunteers.
Termination and Departure: Specify procedures for voluntary resignations and terminations, including exit interviews to gather feedback.

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Compensation and Benefits

Fair compensation is not just an ethical obligation but a compliance requirement. To maintain their tax-exempt status, nonprofits must ensure executive compensation is “reasonable” under IRS standards.

Research salaries for similar roles at comparable organizations and offer benefits like health insurance, paid leave, and retirement plans if financially feasible. Clearly define unpaid volunteer roles to avoid confusion or misclassification.

Recruitment and Hiring

Effective recruitment policies help nonprofits attract mission-driven employees and volunteers. These policies should include standards for workforce diversity and proper vetting techniques:

Diversity, Equity, and Inclusion (DEI): Promote diverse hiring practices to reflect the community you serve.
Background Checks: Ensure candidates meet legal and ethical standards.
Volunteer Screening: Establish clear guidelines for vetting and onboarding volunteers.

By employing these techniques, you can assemble a team that cares about your cause as much as you do.

Training and Development

Investing in training demonstrates a commitment to employee growth and improves retention. Training policies should include onboarding programs to introduce new hires to the nonprofit’s mission, culture, and operations, as well as ongoing education to offer opportunities for professional development, such as certifications or workshops.

Conflicts of Interest

Conflicts of interest can jeopardize a nonprofit’s reputation and tax-exempt status. To prevent this, a conflict-of-interest policy should be included in onboarding materials for all staff and board members.

Policies should address board member oversight to prevent them from personally benefiting from the nonprofit’s activities, which is one of the most important aspects of running a compliant nonprofit.

Additionally, employees and volunteers should be asked to disclose potential conflicts of interest and establish procedures for addressing and resolving them.

Workplace Safety

Nonprofits must comply with Occupational Safety and Health Administration (OSHA) standards to ensure a safe environment for employees and volunteers. This is especially important if your nonprofit volunteer efforts are directed at causes that involve potentially dangerous situations.

Develop plans for fires, natural disasters, and medical emergencies. Create a zero-tolerance policy for workplace harassment and discrimination, and address safety considerations for remote employees.

Volunteer Policies

Volunteers are vital to nonprofit operations, and they require policies tailored to their unique roles. Clearly define their responsibilities to avoid overlap with paid staff roles.

If someone is assigned a volunteer position that should be considered a paid role within your organization, you may encounter legal issues if that volunteer claims they’re owed compensation for their work.

Additionally, train your volunteers in order to define their expectations. Make it clear that volunteers should not perform the work or duties of a paid employee and draw clear boundaries that prevent volunteers from overstepping.

What Are the Best Practices for Nonprofit HR Compliance?

Maintaining HR compliance with federal, state, and local laws is necessary if you want to continue to operate. Compliance requirements can change with the implementation of new laws and rules, so you need to stay on top of updates and changes:

Stay Informed About the Law

Nonprofit leaders must monitor changes to employment law, such as minimum wage increases, family leave requirements, and anti-discrimination rules. Subscribe to legal updates from reliable sources, or partner with an HR consultant to stay current.

Conduct Regular HR Audits

Audits help identify gaps in compliance and ensure your HR policies reflect current laws and best practices. Use an HR audit checklist that covers employee classification, wage compliance, and recordkeeping. Update your training procedures as your mission grows and evolves.

Ensure Proper Classification of Workers

Misclassifying employees as contractors or volunteers can lead to penalties — in fact, it’s a common pitfall for nonprofits. Regularly review your worker classifications to comply with labor laws.

Use IRS guidelines to determine whether a worker is an employee or contractor rather than internal classifications. The IRS requires that organizations utilize specific criteria, and their rules will always supersede your own.

Maintain Accurate Records

Keep detailed records of payroll, tax filings, performance reviews, and volunteer agreements. Most nonprofits use secure cloud-based storage systems to maintain their records, which makes it easier to produce documents immediately upon request.

Foster a Culture of Compliance

Train employees and volunteers on compliance. You can do this by hosting regular training sessions on topics like harassment prevention, safety protocols, and ethical behavior.

Finally, you should develop an open-door policy for reporting misconduct and handle reports swiftly and appropriately.

What Challenges Do Nonprofits Face in HR Compliance?

Many people view nonprofit volunteer or career opportunities as transitional. For example, students often utilize volunteer opportunities for college applications or entry-level positions for part-time work experience. Even full-time positions offer modest salaries that many employees feel aren’t sustainable.

But those aren’t the only challenges that a nonprofit faces:

Multi-State Workforce: Nonprofits with employees in different states must comply with varying labor laws.
Limited Resources: Budget constraints can make offering competitive compensation or investing in HR technology difficult.
High Turnover: Frequent changes in staff and volunteers require ongoing training and documentation efforts.

Many HR professionals in the nonprofit sector find that perpetual recruiting and hiring cycles help close the gap. Maintaining the mentality that the door to your nonprofit is always open can help move people into new roles and volunteer opportunities continuously.

Streamline Your Policies With Mosey

Crafting and maintaining HR policies for a nonprofit is shaped by legal requirements, resource limitations, and mission-driven operations. By implementing clear, comprehensive policies and staying informed about legal updates, nonprofits can create a supportive, compliant workplace that champions their cause.

With Employee Handbooks by Mosey, you can update your policies in minutes. Book a demo of Mosey to learn how our compliance platform can work for your nonprofit.

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