Payroll for nonprofits: costs, FUTA exemption and what to ask

Quick answer: payroll for nonprofits

Payroll for 10 employees

$87 to $200 a monthPatriot to Gusto Plus, published prices

FUTA for a 501(c)(3)

Not owedSaves $42 per employee a year

Nonprofit payroll discounts

None publishedAt the payroll providers we checked

2026 403(b) deferral limit

$24,500+$8,000 catch-up at 50+

Nonprofits pay the same published payroll prices as businesses. None of the payroll pricing pages we checked on October 16, 2026 offers a nonprofit rate; the one documented nonprofit discount in our research is Atlas, which prices its employer of record service at $399 per employee a month for eligible NGOs and nonprofits instead of $599.

What changes is tax. A 501(c)(3) is exempt from federal unemployment tax (FUTA), and many can choose to reimburse the state for actual unemployment claims instead of paying a SUTA rate. Your payroll software has to know both, or it will calculate tax you do not owe.

What nonprofit payroll costs

For a 25-person nonprofit the spread is $162 a month (Patriot Full Service) to $380 (Gusto Plus), or $1,944 to $4,560 a year. The FUTA exemption is worth 25 employees x $42 = $1,050 a year that a correctly set up 501(c)(3) does not pay, set against a $4,560 minus $1,944 = $2,616 yearly gap between those two plans. For every add-on fee, see what payroll costs per employee.

Nonprofit payroll providers compared

Ranked by our published payroll scores. Scores come from our scoring method. Payroll services are scored out of 100 on price transparency and cost for 10 employees (25 points), tax filing coverage and guarantee (20), features (20), contract and exit terms (15), support access (10) and documented complaints (10). Scores do not include nonprofit-specific features such as FUTA exemption setup.

Do nonprofits pay payroll taxes?

Yes, most of them. Being tax-exempt means the organization does not pay income tax on its mission income. It does not exempt it from employment taxes.

Churches have extra rules: ministers are taxed differently and some churches elect out of FICA for non-minister staff. See church payroll and accounting.

Reimbursing vs contributory: the SUTA choice

A contributory nonprofit pays a SUTA rate on each employee's wages up to the state wage base, like a business. A reimbursing nonprofit pays nothing until a former employee collects unemployment, then repays the state dollar for dollar (the US Department of Labor calls these reimbursing employers in its unemployment insurance guidance). Low-turnover organizations often save; one large layoff can cost more than years of contributions.

Some states also price nonprofits differently. Missouri sets the 2026 new employer rate at 1.00% for nonprofit and government employers versus 2.376% for others, on a $9,000 wage base: $90 per employee a year instead of $213.84.

Before you pick payroll software, check that it supports a reimbursing account (no SUTA calculated, wages still reported each quarter). Rates for every state are in 2026 SUTA rates by state; if you are considering a PEO, read how a PEO affects reimbursing status first, because a PEO that reports under its own state account can undo the election.

What to ask a payroll provider as a nonprofit

1. Can I turn off FUTA? Ask to see the setting and a test pay stub with no FUTA line.
2. Do you support a reimbursing SUTA account in each state where we have staff?
3. Can wages be split by program or grant? Funders often ask for payroll by grant. Check whether the export maps to your fund accounting classes.
4. Do you administer a 403(b)? 2026 limits: $24,500 deferral, $8,000 catch-up at 50 and over, $11,250 super catch-up at 60 to 63.
5. How are volunteer stipends and board member payments handled? Paying a volunteer can turn them into an employee or a 1099 contractor. See W-2 vs 1099 rules and how to pay contractors.
6. Who pays penalties if you file late? Gusto reimburses penalties from its own late remittance (not interest; notices due 30 days before the response date). QuickBooks pays penalties and interest up to $25,000 a year only on Workforce Elite. Patriot does not publish its guarantee terms.

Nonprofit accounting and payroll together

Small nonprofits often pair payroll with fund accounting software. QuickBooks Workforce bundles payroll with QuickBooks Online ($88 + $6.50 per employee with Simple Start). Aplos is accounting software built for nonprofits and churches; we have not verified its current prices, so check its pricing page before you compare totals.

Hiring staff abroad for an international program? Atlas lists $399 per employee a month for eligible nonprofits on its employer of record service (checked October 16, 2026). See EOR pricing compared.

Common nonprofit payroll mistakes

• Paying FUTA you do not owe because the software was set up like a business.
• Assuming tax-exempt means no payroll tax. FICA and withholding apply to every 501(c)(3).
• Losing reimbursing status by accident when moving to a PEO.
• Paying regular volunteers stipends with no tax treatment.
• Paying program staff as contractors to save tax. The IRS test is the same for nonprofits. See exempt vs non-exempt rules for overtime questions once staff are on payroll.