HR for Nonprofits: HR Compliance Checklist for Nonprofits (2025)
When talking about nonprofits, people often think of making an impact, raising awareness about a positive cause, or simply helping others. So, no one would be surprised to learn that numerous nonprofits don’t have an HR team or dedicated HR professionals because they're not businesses in the traditional sense.
But, here's the catch: nonprofits are expected to stay compliant with their staff in many ways that… quite resemble how businesses handle it. They might have collaborators instead of employees, but they need to run HR processes just like a company would. Still, unlike traditional businesses, nonprofits often operate with limited budgets, a mix of employees and volunteers, and under unique legal considerations. So, for nonprofits who don't have a dedicated Chief People Officer (and most don't have one), the HR terrain is particularly slippery. To make things even more confusing, compliance directives aren’t always straightforward for nonprofits. Falling behind can lead to legal issues or even put their tax-exempt status at risk.
But, with 2025 bringing updates to workplace policies and labor regulations, it's a good time to consider once again what your HR questionnaire for your nonprofit looks like. This guide breaks down the key compliance areas nonprofits need to focus on so that you stay organized and compliant without unnecessary stress.
Understanding HR Compliance for Nonprofits
HR compliance means following labor laws, tax regulations, and workplace policies that apply to your workforce. For nonprofits, this includes standard employment laws, plus rules related to tax-exempt status and volunteer management.
Nonprofit HR vs For-Profit HR
While nonprofits and for-profits alike bear some Human Resources legal obligations, there are key differences that complicate HR compliance for nonprofits.
Many nonprofits rely on volunteers to support their mission. Unlike paid employees, volunteers aren’t covered by the same labor laws, but organizations still need clear policies to avoid misclassification issues. Misclassifying a worker as a volunteer when they should be considered an employee can lead to legal and financial consequences. The Council on Nonprofits explicitly mentions that errors in classification are a significant risk to account for.
Budget constraints also play a big role. For-profit organizations typically have larger budgets. On the other hand, nonprofit organizations often operate with limited funding, which can make it challenging to hire dedicated HR staff or legal advisors. As a result, HR responsibilities may fall on executive directors or administrative staff, who usually juggle multiple roles.
Finally, tax-exempt status adds another layer of complexity. To maintain 501(c)(3) status, nonprofits must follow specific IRS regulations, impacting payroll taxes, employee benefits, and financial reporting. Failing to comply with these rules could put an organization’s tax-exempt status at risk.
Key Legal Obligations for Nonprofits
When talking about nonprofit Human Resources, these state and federal employment laws must be taken into account:
- Fair Labor Standards Act (FLSA): It sets rules for minimum wage, overtime pay, and employee classification.
- Title VII of the Civil Rights Act: It prohibits workplace discrimination based on race, color, religion, sex, or national origin.
- Family and Medical Leave Act (FMLA): It grants eligible employees unpaid leave for medical or family-related reasons.
- OSHA Regulations: They require organizations to provide a safe and healthy work environment, even for nonprofits.
- State-Specific Laws: Some states have additional protections, such as paid leave policies, stricter harassment prevention measures, or expanded employee rights.
HR Compliance Checklist for Nonprofits
HR compliance is a necessary part of running a nonprofit, but with a mix of employees, volunteers, and independent contractors, it can get confusing. This checklist covers the most important areas to help your organization stay on track with legal requirements and best practices. You can also call them HR best practices for nonprofits.
1. Employee Classification and Labor Laws
One of the most important compliance tasks for nonprofits is correctly classifying workers. Employees, independent contractors, and volunteers all have different legal obligations, and misclassifying them can lead to serious legal and financial consequences. Employees are entitled to benefits and protections under federal laws, while independent contractors handle their own taxes and benefits. Volunteers, on the other hand, should not be doing work that would normally require paid employees, as that could create legal risks.
Nonprofits must also follow wage and hour laws. The FLSA requires that non-exempt employees be paid at least the minimum wage and receive overtime if they work more than 40 hours per week. Some states have additional labor laws that set higher wage requirements or stricter overtime rules, so nonprofit organizations need to be aware of local regulations as well.
Exempt vs non-exempt employee difference →
2. HR Policies and Employee Handbook
A well-organized guidebook for collaborators helps explain what is expected and makes sure that both employees and volunteers know the rules of the workplace. It should outline key policies on anti-discrimination, harassment prevention, and professional conduct.
With remote work becoming more common, nonprofits should also establish policies that address communication, cybersecurity, and work-from-home expectations. Even organizations with limited remote employees should define when and how remote work is allowed to avoid confusion.
3. Recruitment, Hiring and Onboarding
Hiring in the nonprofit sector comes with special challenges, such as recruiting mission-driven employees and properly screening volunteers. Organizations should follow structured hiring processes to maintain fairness and compliance with labor laws. This includes clearly defining job roles, conducting legal background checks if necessary, and making sure all employment agreements are properly documented.
ATS software can be a game-changer for nonprofits looking to simplify hiring. Many tools, like TalentHR, allow organizations to manage job postings, applicant tracking, and interview scheduling in one place. Once a candidate is hired, onboarding should also involve adequate documentation, such as contracts and tax forms, which nonprofits and staff can file and sign with a document signing tool.
4. Payroll, Taxes and Benefits Compliance
Payroll compliance can be especially tricky for nonprofits due to their tax-exempt status. While these organizations don’t pay certain taxes, they are still responsible for withholding local income taxes, Social Security, and Medicare for the staff.
Beyond payroll, nonprofits must also comply with laws regarding employee benefits (or “collaborator benefits,” if you prefer this title). Depending on the size of the organization, this may include providing healthcare, retirement plans, and paid time off. Some states have specific laws around paid leave, so organizations should review local regulations to stay in compliance.
For legal guidance, organizations can turn to government resources like the Department of Labor (DOL), IRS, and state labor departments for up-to-date rules and regulations.
5. Employee Training and Development
Training can be a part of HR compliance for nonprofits, too, especially when it comes to mandatory topics like workplace safety (we'll get into what safety entails in the next point on this checklist).
But there are other non-mandatory, non-hazardous areas in which HR can train volunteers. For example, if the nonprofit uses a certain tool to allow the staff to request their PTO… then the staff should know how to use it. Many organizations also benefit from HR software that includes employee self-service features that allow staff to access training materials and track their progress. That could be the shortcut to checking this item.
What is employee self-service? →
6. Employee Safety
Safety norms for nonprofits have been dictated by the OSHA ever since the Williams-Steiger Occupational Safety and Health Act of 1970. This act gave the Federal Government the authority to set and enforce safety and health standards for most of the countries workers.
In 1975, the OSHA clarified that the act legally bound nonprofits. As their website says: “Any charitable or nonprofit organization which employs one or more employees is covered under the Williams-Steiger Act and is required to comply with its provisions and the regulations issued thereunder.”
Most of the workplace safety measures don't require training, though, and are sheer common-sense policies. Under the OSHA, employers—and this includes nonprofits—must set up a workplace “free from recognized hazards that are causing, or are likely to cause, death or serious physical harm” to employees.
7. Record-Keeping and Document Management
Keeping accurate records is a legal requirement. Nonprofits will have to store basic HR documents, including employment records, tax filings, payroll information, and signed agreements, for specific periods of time. Failing to do so can lead to compliance issues or legal disputes.
The easiest way to check this item is with a software platform that can safely store and process the documents.
8. Tools for Staff to Report Any Incident
Nonprofits are expected to have clear policies in place to prevent and address workplace harassment. Whistleblower policies can also help with a way for workers to report concerns anonymously and without fear of retaliation. A quick way to cross out this item is by adding a whistleblowing tool into the nonprofit's tech stack.
The Role of HR Technology in Nonprofit Compliance
HR software helps nonprofits keep up with compliance as they automate key HR functions like onboarding a new staff member, assigning them benefits, or allowing them to take the PTO they have earned. All of these tasks have a certain playbook, and HR software is a very good way to make sure they are completed in compliance with the norms. For example, if you're hiring (or bringing in) collaborators from abroad, then maybe their benefits package is slightly different. HR software is a quick way to unify benefits management, even for nonprofits.
HR software also makes it easy to store and manage important employee records, such as tax filings, payroll, and contracts. Cloud-based systems—such as TalentHR—offer secure storage and keep sensitive information safe and accessible. These systems are designed with encryption and access controls to protect data and help you meet privacy regulations.
An integrated HR system brings payroll, benefits, and compliance tools together in one place. It helps nonprofits remain compliant with laws while employees receive the benefits they're supposed to get. When regulations change, you can tweak the system so your whole workforce is now administered under that new norm.
Address your Nonprofit’s HR Issues with Easy-to-Use Software
Nonprofits don't need to have an HR department to use HR software. That's the biggest takeaway. At the same time, they do need to sort out a daunting checklist—offering the right benefits and onboarding collaborators under the right classification—that belongs to the HR class. Fortunately, HR software can help to complete it. And both free and paid HR services created for nonprofits can help handle HR functions like assigning benefits while staying in compliance.
TalentHR brings simplicity and affordability to HR software for nonprofits. With its all-in-one solution, nonprofits can scale up or down, manage their teams from hire to exit, and save time when adding employees to their databases. The platform also offers a 20% NGO discount on paid plans that allows you to redirect more funds toward your cause.
Sign up for TalentHR for free today—no credit card required—or reach out to us to learn more about how TalentHR can upgrade your HR operations.
