Top 5 HR & Payroll Challenges of Nonprofits and How to Overcome Them


Lisa Pollock

on Mar 26, 2024 6:08:02 PM

Nonprofit organizations face unique challenges when it comes to managing Human Resources (HR) and payroll that can get in the way of allowing them to focus on their mission. Navigating between handling complex compliance issues and HR tasks to achieve optimized performance is hard. To conquer these challenges, nonprofits need to implement a workforce management strategy that addresses industry challenges, streamlining workflows and reallocating resources. 

In this article, we will delve into the top five challenges of nonprofit organizations and explore potential solutions. Nonprofit organizations should also stay informed about emerging trends in 2024 and carefully evaluate which ones are here to stay.

Limited Time to Focus on Purpose and Mission

Each nonprofit organization is driven by a compelling purpose and mission, but they often find themselves entangled in administrative tasks, diverting attention from their core objectives. 

To overcome this challenge HR professionals and executives should consider outsourcing routine HR and payroll tasks to dedicated HR services providers. By delegating these responsibilities organizations can free up valuable time and resources to concentrate on their mission-driven activities.

Back-Office Inefficiency

The use of disparate technologies and systems can lead to inefficiencies in the back-office operations of nonprofits. 

Integrating HR and payroll processes through a unified system is crucial for streamlining operations. When searching for an HR services provider, executives should prioritize solutions that offer seamless integration. This can help ensure a cohesive and efficient workflow, not only reducing manual errors but also enhancing overall productivity.

Managing Compliance Risks

Just like other for-profit organizations, nonprofits need to adhere to the complex legal and regulatory framework as well. Maintaining compliance with ever-changing regulations requires expertise, experience, and a keen eye for areas of risk.

Most nonprofits don’t have the capacity to manage compliance alone without investing too much time and energy into regulatory tasks. Nonprofits can make their life easier by seeking help from an HR services provider who is familiar with the federal and local labor laws that apply to their organization so that they can spend less time on compliance tasks.

Unlocking New Grant Opportunities

Securing funding through grants is a perpetual challenge for nonprofits. To overcome this obstacle, organizations should prioritize grants and understand the data needed to support grant requests. Having an HCM platform that provides employee metrics, data and reports to support these requests simplifies this requirement and saves nonprofits time.  

Collaborating with an HR and payroll service provider that specializes in the nonprofit sector can offer valuable insights and strategies for successfully acquiring grants. This proactive approach can significantly bolster the financial health of a nonprofit organization.

Employee Relations Across the Employee Lifecycle

Managing employee relations throughout the entire lifecycle, from hiring to succession planning, is critical for nonprofit success. HR professionals and executives should prioritize creating a positive work environment and fostering employee engagement. 

Implementing a talent management strategy helps with recruiting and retaining top talent. Additionally, developing comprehensive employee development programs and succession plans ensures a smooth transition in leadership roles, contributing to long-term organizational sustainability.


Overcoming nonprofit challenges is essential for these organizations to achieve their mission. By addressing limited time constraints, back-office inefficiencies, compliance risks, grant acquisition hurdles and employee relations, nonprofits can pave the way for sustained success. 

Collaborating with a specialized HR and payroll service provider is a strategic move that not only streamlines operations but also empowers nonprofits to focus on what truly matters – making a positive impact on the world.

Nonprofit HCM Solution Info Sheet

Author: Lisa Pollock

Lisa Pollock (Circle)Lisa Pollock is the Vice President & Chief Human Resource Officer at The Human Resource Consulting Group and oversees the HR Business Partner Group and HR Operations. She has more than 25 years of experience in human resources, with expertise in building infrastructures for growing businesses focusing on HR compliancetalent acquisition, and implementing best practices. Lisa has extensive experience in industries such as municipalitiesnon-profit organizations, manufacturingprofessional services, and retail.

Topics:Connecticut HRHR & PayrollNonprofit Organization

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Nonprofit HCM Solution Info Sheet

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