HR Basics for Small Nonprofits: Where to Start

A small nonprofit needs the same HR basics as any other employer: clear lines between employees and volunteers, correct pay, a short set of written policies, tidy records, and a plan for who handles employee concerns. Start with those five and add more as your team grows.

Most small nonprofits I talk with did not set out to build an HR function. They set out to serve a mission, and HR showed up the first time someone asked about time off, a volunteer took on a staff-sized job, or a board member got a complaint in the parking lot. The good news is that the basics are not complicated, and you can put them in place one at a time.

1. Know who is an employee and who is a volunteer

Volunteers are a gift to a nonprofit, and the rules around them are narrower than many boards expect. The U.S. Department of Labor says individuals may volunteer for charitable, religious, civic, or similar nonprofits as a public service without being covered by the Fair Labor Standards Act (FLSA). In its words, that applies when they volunteer freely for public service or humanitarian objectives, without contemplation or receipt of compensation (DOL Fact Sheet #14A, page dated August 2015).

The same fact sheet draws some lines worth knowing. Volunteers should not displace regular employees or do work that would otherwise be done by employees. Individuals generally may not volunteer in commercial activities the nonprofit runs, such as a gift shop. And paid employees cannot volunteer to provide the same kind of services to their own nonprofit that they are paid to provide.

If you work with people who are paid per project, ask whether they are contractors or employees before you assume. Our guide on employee or independent contractor walks through the classification check.

2. Pay people correctly

Many nonprofits assume wage and overtime rules do not apply to them. Sometimes that is true for charitable work and sometimes it is not. It depends on what the organization does and how its employees spend their time. DOL explains how it looks at nonprofits in Fact Sheet #14A. Your state may also have its own minimum wage and overtime rules, so check with your state labor department before you decide that overtime does not apply to your team.

Be careful with the word "exempt." Being salaried does not automatically make someone exempt from overtime, and the person's actual duties matter. DOL explains the basics on its overtime page. If you are unsure how to classify a role, check with an employment attorney before you decide.

3. Find out which anti-discrimination laws apply to you

Headcount decides which federal laws apply. The EEOC says most of the federal anti-discrimination laws cover employers with 15 or more employees, and the age discrimination law covers employers with 20 or more. The EEOC counts an employer as covered if it has, or had, at least 15 employees for at least 20 calendar weeks this year or last year (EEOC small business information).

Many states have their own anti-discrimination laws, and some may reach smaller employers, so check with your state agency.

4. Write down a short set of policies

You do not need a 60-page manual. You need the handful of rules your staff will ask about most, written in plain language: pay and timekeeping, time off, how to raise a concern, and expected conduct. Our post on whether a small business legally needs an employee handbook explains what is and is not required and how to start small.

Boards sometimes ask about governance policies, such as a conflict of interest policy. Your accountant or attorney can advise on what fits your organization.

5. Keep clean records and give concerns a clear path

Good records protect your staff and your mission. Keep a personnel file for each employee, and write down important conversations while they are fresh. We have a copy-ready template in what managers should document after an employee conversation. For new hires, the onboarding guide covers the paperwork and the first 90 days.

Then decide who handles employee concerns. In many small nonprofits the answer is "the executive director," which works until the concern is about the executive director. Name a backup, such as a board chair or an outside HR advisor, and tell your team who that is. Our posts on employee relations and what to do when employees bring every problem to the owner can help you set this up.

One nonprofit-specific cost to understand: unemployment insurance

Some states let 501(c)(3) nonprofits choose between paying regular unemployment taxes and reimbursing the state for benefits actually paid out. Rules and deadlines are set by each state. As one example, Washington lets 501(c)(3) nonprofits choose the reimbursable method, requires them to stay with it for at least two calendar years, and asks for the choice form at least 30 days before the start of a calendar year (Washington ESD). Check your own state's rules and talk with your accountant before choosing.

Frequently asked questions

Do volunteers count as employees?

Not if they volunteer freely for public service without expecting pay, do not take over work employees would normally do, and do not work in the nonprofit's commercial activities, according to DOL. If you are unsure about a specific person, check with an employment attorney.

Does our nonprofit have to pay overtime?

It depends on what your organization does and how your employees spend their time, and state law may also apply. Do not assume your staff is exempt because they are salaried or because you are a nonprofit.

We have 12 employees. Do anti-discrimination laws apply to us?

Most federal anti-discrimination laws apply at 15 employees, but many states set their own thresholds. Check your state agency, and treat fair, consistent treatment as a baseline whatever your size.

Do we need an employee handbook?

Requirements vary, so check your state. Even where a handbook is not required, written policies help you treat people consistently. Start with the few policies your team asks about most.

Should the board handle HR?

Boards usually oversee the executive director and approve major policies, while the executive director handles day-to-day HR. That is a common arrangement rather than a legal rule, so write down who does what.

“We weren’t sure we even needed HR. After working with you, now it’s a no brainer. We’ll never go back.” Amanda Marek, Active Youth Wisconsin

A low-pressure next step

If you want a second set of eyes on where your nonprofit stands, take the free HR Snapshot or learn about the HR Diagnostic. If you would rather talk it through, you can book a no-pressure HR strategy conversation. You can also read our guide on how to choose HR support for your small business.

Sources checked November 3, 2026: U.S. Department of Labor, Equal Employment Opportunity Commission, and Washington Employment Security Department pages linked above. Some of these pages show older revision dates.

This is general information, not legal advice. Laws change and vary by location, so consult employment counsel for your specific situation.