Outsourcing Payroll & HR Support | Netchex
Payroll & Tax
Oct 11, 2019

How Outsourcing Payroll & HR Support Can Help Nonprofits Overcome Major HR Obstacles

How Outsourcing Payroll & HR Support Can Help Nonprofits Overcome Major HR Obstacles


Working in the nonprofit sector can be simultaneously rewarding and frustrating. The people you work with and the rewarding nature of the work are often among highlights, while the bureaucracy and all the restrictions that come along with it are near the bottom. 

Additionally, because nonprofits are funded primarily by various grants and generous donations, they face stricter budgetary constraints than traditional businesses. Ultimately, this limited budget is the underlying factor in all obstacles faced and decisions made by the organization.

It takes a special kind of person to work for a nonprofit—even more so to handle the HR for one. For HR professionals working in the nonprofit sector, this challenging structure and the unique challenges it presents can make work even more difficult. Here are some of the biggest stumbling blocks nonprofit HR professionals must overcome and how integrated HR technology can help. 

Recruiting & Retention

Because compensation is not typically the highlight of a nonprofit’s recruitment and retention efforts, HR teams are forced to focus on nontraditional benefits and extra perks, including working from home, extended parental leave, or parking/commuting stipends. By providing “extra” benefits that will set them apart, nonprofits can pull in a larger pool of applicants and help retain current employees.

Without a robust recruiting budget, HR needs to utilize recruiting, hiring, and onboarding technology to ease the burden. A powerful applicant tracking system and streamlined recruiting, interviewing, and candidate scoring allows you to find the best candidate for the job faster and more successfully. And with onboarding and payroll integrated all in one place, it makes HR’s job much easier even after the hiring process.

Benefit Administration

So, if nonprofits employ a better benefits package as a way to attract and retain employees, how is HR supposed to handle all of it? Laws governing benefits change often, which can cause headaches for HR surrounding eligibility and enrollment.

Outsourcing benefits administration can make benefits management straightforward and worry-free. Easier enrollment and management empower employees to control their benefits coverage, while things like carrier communication and COBRA administration allow HR to manage the entire lifecycle of employees.   

Payroll & Taxes

Managing payroll is difficult enough, but taxes make the job almost impossible without help. And because of the unique status of nonprofits, there are even more tax-related issues to consider—including withholding FICA and FUTA exemptions.

A lot goes into payroll, and nonprofits need a company that can cover it all and is fully integrated. Additionally, automated taxes and reporting keep you compliant and ensures accuracy with electronic IRS filing and pay withdrawals, quarterly online tax statements, W2 preview, and various data reports to keep you informed and on-track.


While nonprofits often have unique circumstances surrounding taxes, laws governing employers apply just the same as regular businesses—including the Affordable Care Act (ACA) and Fair Labor Standards Act (FLSA). Most nonprofits do not have the time and resources to track these or stay up-to-date with new regulations, such as the U.S Department of Labor’s updated overtime rules. 

Payroll and HR support technology can help you gain a clearer picture of your company’s overall compliance, better determine eligibility, and stay informed on any updates surrounding both federal and local regulations. Outsourcing is more than worth it when weighed against the potentially heavy fines that come with failure to comply.

Finding a provider who understands the nonprofit sector

It is imperative that nonprofits team up with a payroll company that has experience serving clients in the nonprofit sector. When shopping, make sure the company you are considering has a proven success record and current clients in the same sphere as you. After performing an internal HR audit, make your company’s issues clear from the start and allow them to show how they can help.

To keep outsourcing costs in perspective, compare them against the hidden cost of mismanaged HR—such as poor recruitment and retention, legal costs associated with noncompliance, and hiring more HR professionals to help balance the necessary workload. 

Outsourcing payroll and HR support is a strategic decision that can benefit your entire company. Your HR department may be capable of great things, but resources are often stretched too thin in the nonprofit sector. With limited funds and resources, you can’t excel in every aspect—protect yourself and your company by finding an HR technology solution to help shoulder the load.

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