The 9 Best Payroll Services for Nonprofits

As a nonprofit, handling payroll can be a challenging and time-consuming task that takes you away from actions supporting your mission. The process can be complex, especially with limited resources and unique compliance requirements for different geographies.

Outsourcing payroll to a service provider can simplify this process and help your organization comply with all applicable laws and regulations. Payroll service providers may also offer other valuable HR services, reducing your overall staff hours and costs.

This article explores the top payroll service providers for nonprofit organizations. We discuss the main features, pricing, and suitability of each payroll processing service for nonprofits of various sizes.

Whether you’re a small nonprofit just starting or a larger organization with more complex needs, you’ll find a payroll service that caters to your requirements in this comprehensive guide.

Importance of payroll services for nonprofit organizations

Choosing the right payroll service for your nonprofit is important for ensuring your employees receive their salaries accurately and on time and for staying in tax compliance with any regulations that apply.

A dependable payroll service is indispensable because your organization must handle payroll taxes and submit accurate reports to government agencies, such as the Internal Revenue Service (IRS) in the United States or HM Revenue and Customs (HMRC) in the United Kingdom.

First and foremost, your organization needs to ensure it has the appropriate designated nonprofit status, such as 501(c)(3) in the U.S. Check the appropriate governing bodies for non-U.S. equivalents. While you can complete the appropriate forms and review all IRS requirements (including getting an Employer Identification Number), some payroll services will help walk you through the process.

Note that even with nonprofit status, you’ll still be responsible for withholding income tax and Medicare and Social Security taxes from employees’ paychecks.

This management of payroll and payroll taxes can be a cumbersome task for nonprofit leaders. Thankfully, your payroll service can help. Here are some other specialized features to look for as you consider different payroll services for your nonprofit:

• Compliance. Look for a service that can help you manage all federal, state, and local employment classification and nonprofit requirements. These features are especially helpful if you’re a small nonprofit that doesn’t have a full-time HR manager.
• Accounting. Keeping detailed books is critical so that you can communicate with donors about where their money is going. Some platforms automatically process donations and expenses and allocate them to different categories.
• Reporting. Your payroll service may produce budgets or reports that you can download and share with other stakeholders to make decisions about budgeting and resource allocation.
• Donation and additional income tracking. It’s essential that you track what funds are coming in as donations and keep them separate from any revenue or business income. Many of the platforms on this list can help.
• HR services. Some payroll service providers can help address typical human resource functions such as talent sourcing and management, onboarding, and DEIA (diversity, equity, inclusion, accessibility) tracking.
• Integration with other tools. Make sure you choose a platform that you can use with your existing bookkeeping or time-tracking software.

Many payroll services are well suited for nonprofits and can help your organization stay tax compliant. By accurately recording employee time and attendance, these services help avoid expensive mistakes and preserve your nonprofit’s tax-exempt status.

Plus, they help you stay updated on changing tax laws, keeping your nonprofit informed and compliant with ongoing regulatory requirements.

9 nonprofit payroll services to consider

Many payroll service providers offer useful products, each with different features, pros and cons, and pricing. Let’s look at the top payroll services for the nonprofit sector.

1. ADP

ADP is a comprehensive payroll and human resources (HR) platform that works with nonprofits and social services organizations. In addition to processing payroll, ADP helps nonprofits file taxes and generate reports.

The organization spends time on a regular basis talking to their nonprofit clients about their greatest needs. Based on their clients’ feedback, ADP has created a platform that works well for tracking data regarding grants and fundraising.

This platform also tracks volunteer and employee hours by specific events and individual departments. This simplifies the process of creating time and effort reports.

With over 1,000,000 clients worldwide, ADP offers various features to help manage payroll, track employee hours, log time off, maintain certifications and credentials, and ensure compliance with tax and labor laws.

Their compliance solutions include live HR support, proactive compliance alerts, and training for all employees.

Features:

• Talent management solutions for recruitment and retention
• Customizable onboarding training experiences
• Automated allocation of employee compensation to respective funding sources
• Integrated payroll, time and attendance, benefits, and HR services
• Manages records of employees’ certifications and credentials
• Provides onboarding training to help new hires become familiar with your mission

Pros:

• Comprehensive platform for managing payroll, HR, and compliance tasks
• Specialized features for nonprofit and social services organizations, such as volunteer hours tracking and automated allocation of employee compensation to its respective funding source
• Extensive experience and a large client base
• Range of outsourcing and professional employment organization (PEO) options available
• Employees can access payroll reports and update their information online
• Offers discounted rates to some eligible nonprofits

Con:

• Can be more complex than needed for small nonprofits

Pricing: ADP’s pricing isn’t publicly available. You’ll need to contact the company directly for a customized quote based on your nonprofit’s needs.

2. Gusto

Gusto offers payroll and HR software tools for businesses of all sizes, including nonprofits. The platform has a wide range of features, such as full-service payroll, time and attendance, employee benefits, and talent management.

The service automates many payroll and HR processes. Their software includes time-tracking and expense-tracking tools along with fully customizable reporting. Employees can also donate directly from their paycheck through Gusto Giving.

Gusto is known for its transparent pricing, user-friendly interface, and customer support. Their software integrates with Aplos nonprofit and church software, a platform many organizations use to manage gifts and donations.

Features:

• Full-service payroll with simple payroll reports for easier tax filing
• Automated W-2s and 1099s
• Custom onboarding checklists for new employees
• Time and attendance tracking, including personal time off (PTO) requests and approvals
• Employee benefits management, such as medical, dental, life, and vision insurance
• Helps nonprofits set up their FUTA (Federal Unemployment Tax Act) exemption
• Employees can use the Gusto Wallet mobile app to create financial goals and set budgets

Pros:

• Easy-to-use, all-in-one platform for payroll, HR solutions, and benefits
• Transparent pricing with no hidden fees
• Highly rated customer support
• Automation features to save time and reduce errors
• Wide range of software integration options, such as FreshBooks, Xero, QuickBooks, and Expensify

Con:

• Some user reviews mention problems with tax filings, causing problems with the IRS and misfiling penalties

Pricing: Gusto’s pricing plans start at $40 per month (plus $6 monthly per person).

3. Justworks

Justworks is an easy-to-use payroll software and HR platform designed to cater to small businesses and startups, including nonprofits. The platform offers easy payroll services, employee benefits management, HR tools, and compliance support.

The software comes with 24/7 expert support, so Justworks is always available when you have questions about benefits, compliance, or HR. Their Compliance Support department can provide the latest information about employment regulations and changes.

Features:

• Automated direct deposits for employees
• One-off payments for contractors and vendors
• Payroll tax filings and compliance support
• Auto notifications for employees on payday
• PEO services including access to benefits

Pros:

• Mobile app so employees can access their pay stubs, health insurance, and time off information on the go
• Time tracking integration for payroll processing
• Compliance support, including W-2 and 1099 filings
• 24/7 expert support through phone, email, chat, Slack, and SMS
• Integrated time-tracking and time-off requests
• Full custom onboarding checklist
• Able to integrate with QuickBooks, Zero, and Google G-Suite

Con:

• Some users have issues linking external calendars

Pricing: The Basic plan starts at $59 per month per employee ($49 per month for your 50th employee onward).

4. OnPay

OnPay is a popular payroll software well-suited for nonprofits and 501(c)(3) organizations. The platform helps organizations save time by managing payroll needs, tax filings, and select HR tasks.

Features:

• Automated federal and state taxes, including FUTA exemptions for 501(c)(3) organizations
• Fast and easy payroll system, usable from any device
• Support for multiple pay rates and overtime calculations
• Flexible permissions for delegating payroll tasks

Pros:

• Expert support and detailed resources for payroll, HR, and benefits
• Integrations with leading accounting and time-tracking software
• Automated tax filing
• Transparent pricing

Cons:

• No ability to customize emails that go out to the team once payroll is processed
• No built-in time tracking, but integrates with several tracking software options

Pricing: OnPay pricing plan is $40 a month plus $6 per month per person.

5. Patriot Software

Patriot Software offers payroll features focused on simplicity, accuracy, and compliance while offering additional tools for accounting, time and attendance, and HR management.

The software is popular among small nonprofits looking for a simple payroll solution. Its budget-friendly software is easy to use for tracking books and logging donations.

The platform boasts customer support and competitive pricing, making it an attractive option for nonprofits looking to streamline their financial processes.

Features:

• Unlimited payrolls for employees
• Free direct deposit or print checks
• Customizable payroll
• Generate financial reports for easy bookkeeping
• Allows you to log multiple pay rates for employees
• Integrates well with AP Intego, a popular workers’ compensation company

Pros:

• Highly rated, U.S.-based customer support
• No long-term contracts required
• Guaranteed accurate tax calculations
• Unlimited pay runs
• Offers DIY tax-filing option

Cons:

• The user interface may not be as visually appealing as other platforms
• Only integrates with QuickBooks and their own accounting software
• Some functions require add-ons, such as time-tracking software
• Not designed for companies with more than 500 employees

Pricing: Patriot Software offers a la carte pricing, allowing businesses to choose the services they need. Accounting software starts at $20 a month, while payroll software with DIY payroll tax costs $17 per month plus $4 per employee or contractor. Full service payroll including tax services costs $37 per month plus $4 per employee or contractor.

6. Paychex

Paychex supports nonprofits of all sizes. The platform helps nonprofit leaders file their taxes, manage donations, and keep track of expenses. The software also allows you to keep accurate books so that you can tell donors exactly where their money is going.

Features:

• Automated tax calculation, filing, and submission
• Single solution for recruiting, onboarding, management, and retirement
• Health, dental, and vision insurance options
• Retirement plan management
• Tracks volunteer hours, monetary donations, and in-kind donations

Pros:

• Scalable solutions for businesses of all sizes
• 24/7 customer support via chat and phone
• Flexible pay options for employees (direct deposit, paper checks, and pay on demand)
• World-class compliance team provides support for organizations of all sizes
• Offers mobile app

Cons:

• Pricing information not readily available on the website
• Some users may find the platform overwhelming due to the extensive range of features
• Doesn’t offer unlimited pay runs or global payroll

Pricing: Paychex doesn’t provide specific pricing information on its website. Instead, they encourage interested businesses to request a quote tailored to their needs.

7. Paycor

Paycor is a nonprofit-friendly organization with over 30 years of experience in the industry, Paycor understands the unique challenges faced by nonprofits and offers tailored solutions to help them overcome obstacles, manage labor costs, and ensure compliance.

Features:

• Accurate tax filing and compliance assistance
• Employee record-keeping
• Fully branded career sites to showcase the nonprofit’s mission and beliefs

Pros:

• Tailored solutions for nonprofit organizations, including compliance management, record retention, timekeeping, scheduling, and hiring
• Analytics for evaluating spend and reducing costs
• Comprehensive HR and payroll platform addressing unique challenges in the nonprofit sector, such as compliance obligations, employee process efficiency, and record-keeping
• Expertise in compliance and tax filing for nonprofits

Cons:

• Pricing information not readily available on the website
• Some users say reporting lacks adequate customization

Pricing: Paycor doesn’t provide specific pricing information on its website. Instead, the platform encourages interested nonprofits to request a quote tailored to their needs and budget constraints.

8. Paylocity

Paylocity claims to simplify payroll, employee management, and benefits administration. The platform offers nonprofit-specific features like tracking for grant-related work and customization to fit your organization. It’s an all-in-one solution, including payroll, HR, time and labor, tax compliance, and reporting.

Features:

• Offers a DEIA tracking feature to help clients use data to boost their impact and promote a more inclusive experience
• Customizable HR and payroll solutions to fit the organization’s needs
• Comprehensive insights and reporting tools

Pros:

• Award-winning support to help nonprofits achieve their mission
• Consistent investment in product development for innovative features
• Streamlined payroll processing, with tracking for grant-related work

Cons:

• Some users may find the platform more complex than other options
• Some users report the learning portal isn’t very user-friendly and makes it hard to update training without restarting a lesson

Pricing: Paylocity doesn’t provide specific pricing information. The platform has various plans, but you must enter your information and talk to sales for exact pricing.

9. QuickBooks Payroll

QuickBooks Payroll is a well-known payroll solution that provides features to help nonprofits spend less time on accounting and more time on the work they truly care about.

The service includes a function that automates expense tracking. This feature can keep all your expenses and accounts separate so your budget is always accurate and up to date.

There’s also a function that automatically syncs donations from several popular fundraising platforms. Since donations are a big part of the money that comes into a nonprofit organization, QuickBooks is dedicated to making those dollars easy to track and allocate.

Features:

• Same-day direct deposit for employees
• Automatic calculation, filing, and payment of payroll taxes
• Auto Payroll for automated payroll processing
• HR support, workers’ compensation, health benefits, and 401(k) plans integration
• Connects with several popular fundraising platforms for automatic donation syncing
• Incorporates digital receipts so you don’t have to keep up with paper copies

Pros:

• Comprehensive payroll solution with various features
• Integration with other QuickBooks products for financial management
• Tax penalty protection and automatic tax handling
• Wide range of employee benefits and HR support options
• Time tracking and invoice creation
• 24/7 expert support with callback assistance
• Quickly creates financial reports for boards, staff, funders, and the public
• Cloud-based database allows all workers to access information regardless of location

Cons:

• Additional filing fees for employees in other states
• 24/7 support only for the Elite plan

Pricing: QuickBooks Payroll offers several pricing plans depending on the features and level of service required. The plans start at $22.50 per month plus $5/month per employee for just payroll or $37.50 per month including accounting.

Considerations for nonprofits regarding employment taxes

Payroll taxes can be complicated for nonprofits, as they must comply with federal and state regulations. We provide some important considerations for nonprofit organizations when dealing with payroll taxes.

• Payroll tax requirements. Nonprofits generally must adhere to the same payroll tax requirements as for-profit businesses, including employee withholding for federal income tax, Social Security tax, and Medicare tax.
• Tax-exempt status. Depending on their classification, some tax-exempt organizations may not have to pay the employer portion of Social Security taxes. Nonprofits must understand their tax-exempt status and any associated tax benefits.
• Classification of employees and independent contractors. Nonprofits must accurately classify employees and independent contractors to avoid penalties or back taxes resulting from misclassifications.
• Payroll tax laws and regulations. Nonprofits must stay informed about changes to tax rates, reporting requirements, and deadlines to remain compliant with payroll tax laws and regulations.

Stay on top of compliance with Upwork

Managing payroll for your nonprofit organization can be complex and time-consuming. Ensuring compliance with federal and state regulations, staying updated on tax laws, and accurately classifying employees and independent contractors are just a few aspects to consider. The right payroll software can help simplify this process and allow you to focus on your organization’s mission. If you need additional professional support, consider engaging a freelance payroll specialist through Upwork.

Upwork is not affiliated with and does not sponsor or endorse any of the tools or services discussed in this article. These tools and services are provided only as potential options, and each reader and company should take the time needed to adequately analyze and determine the tools or services that would best fit their specific needs and situation. Prices are current at the time of writing and may change over time based on each service’s offerings.

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Upwork does not provide legal advice. Each reader and company should take the time needed to adequately analyze the laws that apply to their business endeavor.