Employment laws are growing increasingly complex at a local, state, and national level. As a result, human resources is an essential, technical, and compliance-driven position.
Ensuring maximum compliance with employment laws is a key component of safeguarding the nonprofit’s finances.
Consider what happens when funders find out their money is being used to pay out lawsuits because wages were not paid correctly instead of supporting the mission.
For example, in 2021, a California nonprofit paid tens of thousands of dollars to settle a class-action lawsuit in which 72 current and former employees alleged they had been misclassified as “exempt” or salaried.
This is not the kind of news you want to share with your board.
Nonprofits are also stewards of the public’s trust. Negative publicity about failure to correctly pay wages reflects poorly on the sector as a whole and your nonprofit mission. A robust human resources function helps reduce this risk.
What does human resources staff do at a nonprofit?
On a practical level, human resources staff can support your nonprofit in the following ways:
- Reduce the expense of employee turnover by supporting employee engagement and retention.
- Run a performance management system to ensure reviews are completed, and that the content of those reviews is fair, objective, and lawful.
- Review written discipline and advise on corrective actions to ensure they are applied consistently.
- Help managers conduct consistent, fruitful interviews with applicants.
- Resolve interpersonal conflict between employees.
- Reduce unconscious bias and support the nonprofit’s goals related to diversity, equity, and inclusion.
- Develop procedures for internal complaints of improper or illegal conduct.
Once your human resources staff has grown to three or more employees, you can start having them specialize in specific roles, such as managing leaves of absence or being the main contact for benefits-related issues.
Of course, cross-training for each person’s distinct responsibilities ensures that there is adequate coverage in the event of an unexpected absence.
When should you hire your first employee for human resources?
There is no magic number.
It’s common to think that adding your first human resources staff is a matter of the size of the employer. The job website Indeed identifies a standard rule of 1.4 human resources staff for every hundred employees, although this can vary quite a bit.
Consider the complexity of the employee side of your nonprofit: The greater compliance obligations you have in your operations, the more you need the support of a human resources function.
Any of these factors will increase your nonprofit’s need to have someone help facilitate employment issues:
- Residential functions that operate 24 hours per day.
- A high percentage of employees that do direct care work.
- A unionized workforce.
- Employees in states that highly regulate employment. For example, complex wage-and-hour requirements in California often means a nonprofit will have a human resources function before similar-sized organizations in less-regulated states.
If you’re not ready to hire someone to run human resources full-time, consider outsourcing to a third-party consultant or company with a strong background in running these tasks in the states where your nonprofit has employees.
What should a nonprofit look for in its first human resource hire?
Human resources professionals who perform the widest variety of tasks are commonly known as “generalists.” They handle a wide range of tasks — from recruitment and hiring to benefits and leave management, as well as employee relations issues.
In a larger or more complex organization, these functions will often be split out, with different people developing an expertise, but also being cross-trained on each other’s duties.
Areas of expertise that fall within the human resources function are typically comprised of:
- Employee relations
- Benefits and compensation
- Training and development
Make sure you have framed the purpose of your human resources person or department and, in particular, the extent to which they will be involved in management decisions.
By integrating the human resources function into management decisions, the nonprofit’s strategic vision can be methodically aligned with the discrete, people-orientated tasks that support operations and future growth.
Human resources staff must demonstrate they can keep confidentiality because they will be hearing the most personal details from your employees, such as the need for leave for medical reasons, pregnancy, the loss of a family member, and financial challenges.
In some cases, failure to keep information confidential can violate the law and expose your nonprofit to legal risk.
It’s critical that employees have trust in them — and trust requires demonstrating compassion.
Ellen Aldridge, Labor and Employment Risk Manager for Nonprofits Insurance Alliance, observes about human resources staff:
“Fifty percent of the job is compliance, and the other 50 percent is empathy. Employees must trust this person because effective risk management requires employees to report to a trusted source when something is not right. So, consider not only technical skills, but emotional intelligence when hiring human resources staff.”
Be wary of promoting someone with no experience.
Human resources is a profession and it requires expertise. The role needs to be staffed with someone who has that expertise, or they need to be given the training to get it.
You can take the smartest, hardest-working employee, but if you put them into a role that requires them to understand the company’s obligations with respect to things like leaves of absence and payroll, they are being set up to fail.
While common sense is always a valued characteristic in any employee, it’s not enough to take someone who has been performing well in a general administrative role and make them your first human resources employee.
There is no substitute for experience with the application of increasingly technical employment laws in varying situations that arise in your specific employment setting.
Hiring someone with good judgment is a good start — but putting them in a human resources role with no training is setting up your nonprofit for disaster.