Non-profit organizations face many of the same challenges as for-profit businesses, but usually with more limited resources. Over the past decade, the number of non-profits has increased by 30%: there is currently one non-profit for every 175 Americans. This means funding is more strained and uncertain than ever, and competition for talented non-profit leaders is even stronger.
Non-profits are passionate about their mission, but they don´t always make adequate investments in the infrastructure needed to support their goals. To accomplish their mission, non-profits and charitable organizations have to maximize their people and their processes. As such, there are a few unique needs related to Human Resources and payroll that non-profits face.
Non-Profit Staffing Needs
Employees are arguably the most valuable assets in any company, and even more so in non-profit organizations. As Peter F. Drucker put it in Managing the Non-Profit Organization, “An effective non-profit manager must try to get more out of the people he or she has. The yield from the human resource really determines the organization’s performance.” But non-profits face many staffing challenges.
The growing number of non-profits means more organizations are competing for experienced managers and staff. At the same time, many people who aspire to be non-profit leaders struggle with barriers such as lower earning potential, lack of mentorship, a strain on their work/life balance and overwhelming fundraising responsibilities.
Many non-profit organizations require unique skill sets to accomplish their mission. Non-profits can have a difficult time filling positions for healthcare, education, the arts or environmental issues. With roughly half of organizations struggling to hire qualified talent for critical positions, non-profits must wage the “war for talent” in their search for the specialized skills they need.
Non-Profit HR Management
Staying in compliance with government regulations is a major challenge for most businesses, and non-profit organizations are no exception. This issue is compounded by the fact that they typically have smaller or non-existent HR departments, leaving them to figure out the alphabet soup of DOL, EEOC, IRS and PPACA requirements on their own. With so many compliance challenges, partnering with an HR and payroll company—that can provide compliance expertise, alerts and guidance—can be invaluable. In addition, these companies can offer sample HR policies, compliance checklists and other tools to help non-profits manage their risks.
Employee process efficiency
Non-profits tend to have big goals but small budgets. As such, they are required to do more with less. Streamlining certain administrative processes like hiring, benefits enrollment and payroll processing can free up more time for value-added tasks.
Like any business, non-profits are expected to retain certain employee records, such as:
- Employee job application
- Reference and background checks
- Offer of employment
- Job description
- Form W-4
- State W-4 equivalent
- Form I-9
- Employee benefit enrollment or declining forms
- Annual performance evaluations
- Interim evaluations or disciplinary forms
- Exit interview
Note that this is not an exhaustive list. Having one online system to store all employee information and records can be enormously helpful in the necessary task of record retention.
Payroll for Non-Profits and Tax Compliance
As 501(c3) organizations, most non-profits have to deal with special payroll and tax circumstances. Leveraging a payroll provider can help non-profits manage payroll challenges and ensure their taxes are filed correctly.
Non-profits that pay an employee less than $100 in any calendar year don’t need to withhold FICA taxes for that employee. They must pay both the amount of FICA tax withheld from employees’ wages and the organization’s match of that amount.
According to the IRS, “Religious, educational, scientific, charitable, and other organizations described in section 501(c3) and exempt from tax under section 501(a) are not subject to FUTA tax and do not have to file Form 940.” Once a non-profit has received a favorable determination letter from the IRS, they are not required to pay federal unemployment taxes. However, states have different rules about whether non-profits should pay state unemployment taxes—non-profits should check the rules in each state where they have employees.
Occasionally, non-profit organizations will reward their volunteers with a present or a gift card. But there are rules about what should be counted as taxable wages:
- Non-cash gifts of nominal value (such as a holiday ham): should not be counted as taxable wages
- Cash items and other taxable fringe benefits (such as a gift certificate): should be counted as taxable wages
The challenge of managing the unique payroll and tax needs of a non-profit business has led many to outsource payroll processing and tax filing. This ensures that employees get paid and taxes get filed correctly and on time, every time.
Non-Profit HR Solutions & Payroll Services
Payroll and tax issues, staffing challenges and HR management are all significant to non-profit companies. If your non-profit is struggling to fulfill its mission, it may be time to consider partnering with an HR and payroll company like Paycor. Allow us to help you with:
- Compliance management
- Intuitive payroll systems
- Tax filing
- Easy timekeeping and scheduling solutions
- Reporting across multiple locations and organizations
- Tracking training and certifications
- Streamlining the hiring process
- Managing benefits enrollment
- Record retention
With non-profit organizations making up a significant percentage of our client base, Paycor understands your needs and has developed solutions that enable your non-profit to accomplish your mission. Talk to one of our nonprofit HR and payroll management experts today.
Sources: National Center for Charitable Statistics, Inc.com, Manpower, Internal Revenue Service, HR.com, Charles Read
This article is intended as a general overview, and should not be considered legal advice.
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