Best HR Software for Nonprofits

A strong and reliable HR department is at the heart of a successful organization in any industry. However, what this HR team does can vary greatly depending on a company’s size, budget, and goals. This is particularly true with a nonprofit, which has different needs and limitations than a for-profit company.

Unlike a profit-focused business, nonprofit organizations are mission-driven and have to deal with donors, grants, fundraising, managing volunteers, and unique compliance requirements (such as following nonprofit labor regulations). Thankfully, the best HR software for nonprofits can help manage all this, streamline personnel management, and more.

HR software comes in all shapes and sizes. To find the most suitable HR for nonprofits that provides everything a nonprofit needs and avoids wasting money on unnecessary features, it’s essential first to do in-depth research.

Main HR differences in profit and nonprofit organizations

For-profit and nonprofit organizations operate with different objectives and distinctive needs that go way beyond their financial structure:

• Goals: Nonprofits focus on a mission or objective, and for-profits on maximizing earnings for owners or shareholders.
• Compensation: While nonprofits’ compensation packages are often modest and align salaries with budget constraints, for-profits include performance-based incentives aligned with financial goals.
• Resources: Nonprofits work with limited resources, dependent on fundraising, grants, and donations to survive, and for-profits rely on profitability and market competition.
• Talent: Nonprofits prioritize applicants who are passionate and committed to the organization’s goal, and for-profits choose candidates based on skill and experience to ensure profitability and revenue generation.
• Compliance: Nonprofits face stricter regulatory requirements than for-profits due to tax-exemption status.

HR challenges in a nonprofit organization

Unfortunately, many charitable organizations struggle daily with funding, sustainability, and resource allocation. But these are not the only challenges they face:

• Recruitment: It isn’t easy to attract top talent since nonprofits can’t offer the same perks as for-profit companies.
• Global workforce: Nonprofits often have employees and volunteers spread out all over the world, which can be complex to manage.
• Regulatory compliance: Nonprofits must abide by labor laws and regulations in numerous countries, which are constantly changing and closely monitored.
• Worker classification: A nonprofit’s workforce is usually made of volunteers, employees, and independent contractors, and each involves different tax, legal, and benefits responsibilities.
• Payroll management: Tax-exempt organizations with heightened accountability when dealing with payments.

Human resource management in nonprofit organizations deals with numerous challenges that can be overwhelming for a team with few resources, whether that’s because it’s a new company or is just struggling to stay afloat. However, thankfully, HR software for nonprofits can help.

nonprofit human resources best practices

Although HR software may be the key to success, it can only make a company shine if best practices are implemented. However, different challenges require different remedies, and many best practices needed are unique to a nonprofit:

• Transparency: Ensure total transparency regarding the use of donor funds.
• Ensuring diverse and informed recruits: Aim to have a diverse workforce to serve the organization’s mission better and clearly inform hires about the work and commitment.
• Talent retention: Ensure employee engagement, feedback, and strategies to boost satisfaction.
• Proper worker management and classification: Centralized, up-to-date, and easily accessible records with correct worker classification to avoid paying penalties, back taxes, and back pay.
• Compliance: Stay informed on specific nonprofit legal and tax regulations.
• Integrate payroll: Merge with payroll software to issue accurate payments.
• Training: Provide ongoing training and development programs.

How nonprofit HR software can help

Thankfully, along with best practices, HR software for nonprofits can help surmount the many hurdles facing a charitable organization. It provides handy tools such as ATS for managing the process from source to recruitment, letting it carefully choose the best personnel possible for any given position. Plus, it assists with writing clear job descriptions and expectations, ensuring applicants understand the required commitment and are appropriate for the tasks at hand.

Additionally, HR software gathers all worker records in one secure and quickly accessible database, allowing them to update and track data easily. Compliance is also tackled with warnings on legal and regulatory changes in the nonprofit sector.

It also uses automation to help with the correct classification and documentation of nonprofit workers. This is often also available for other HR processes, such as payroll. Furthermore, features to track the use of donor funds are frequently included, as well as staff training, feedback, and achievement recognition tools to promote a positive work culture.

How to choose a nonprofit HR tool

The first step in choosing nonprofit HR software is knowing your organization’s budget. Thankfully, many solutions offer plans or discounts tailored to nonprofits and often include HR-specific features, such as donor reporting and grant management. Most organizations grow, and nonprofits aren’t an exception, so scalability is also important.

The ideal HR software should be user-friendly, making it possible for a large workforce of volunteers and part-time staff to master it quickly without training. Software that provides a wide choice of integrations is also crucial.

Last but not least, the nonprofit HR service needs to ensure global legal compliance. This is vital for avoiding paying penalties or back taxes, as miscalculating taxes or misunderstanding local regulations could bring about the downfall of the organization.

Most HR software for nonprofits is cheaper because it doesn’t include as many features as the regular kind, making it a cost-effective solution that can have a significant impact. Additionally, many services frequently offer nonprofit-specific discounts and free trials, allowing nonprofits to test the waters before committing to software that can help them streamline their way to success.