Free Payroll Tool
See what your payroll provider really charges
Most providers hide per-run and add-on fees. Audit your real cost per employee in about 30 seconds, free.
Run the Payroll Fee Auditor →Blog · Payroll Management · Nonprofit
Nonprofits & Religious Organizations: Payroll Recordkeeping Requirements (2026)
Payroll recordkeeping for nonprofits starts at the federal baseline, three years for payroll records and two for the time records behind them, then adds what reaches this industry: 2 CFR 200.430(g) and 26 CFR 1.107-1(b). BEG runs nonprofit payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
Records specific to nonprofits
Salaries and wages charged to federal awards must be based on records that accurately reflect the work performed and that support the distribution of an employee's pay among activities when the employee works on more than one federal award or on both federal and non-federal activities. Budget estimates alone do not qualify as support for the charges.
A minister's rental allowance qualifies for the exclusion only if the employing church designates it by official action taken in advance of payment. The designation may be evidenced in an employment contract, in minutes or a resolution of the church, or in its budget.
The federal baseline every employer keeps
29 CFR 516 requires payroll records for three years and the records they were computed from, time cards, schedules and piece or commission records, for two years. Employment tax records stay four years after the return they support. Forms I-9 stay three years from hire or one year from separation, whichever is later. For nonprofits the practical rule is that the pay codes for grant-funded payroll allocation and clergy housing allowance produce records of their own, and an audit reads those, not the summary.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Salaries and wages charged to federal awards must be based on records that accurately reflect the work performed and that support the distribution of an employee's pay among activities when the employee works on more than one federal award or on both federal and non-federal activities. Budget estimates alone do not qualify as support for the charges. [2 CFR 200.430(g)]
- A minister's rental allowance qualifies for the exclusion only if the employing church designates it by official action taken in advance of payment. The designation may be evidenced in an employment contract, in minutes or a resolution of the church, or in its budget. [26 CFR 1.107-1(b)]
Read the full guide to how to prepare for a payroll audit, and the rest of the nonprofit payroll library.
Managed Payroll, Handled.
BEG manages payroll at $45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
Nonprofit records: 2 CFR 200.430(g)
Salaries and wages charged to federal awards must be based on records that accurately reflect the work performed and that support the distribution of an employee's pay among activities when the employee works on more than one federal award or on both federal and non-federal activities. Budget estimates alone do not qualify as support for the charges.
Nonprofit records: 26 CFR 1.107-1(b)
A minister's rental allowance qualifies for the exclusion only if the employing church designates it by official action taken in advance of payment. The designation may be evidenced in an employment contract, in minutes or a resolution of the church, or in its budget.
How long does a nonprofit keep payroll records?
Three years for payroll records and two for supporting time records under the FLSA, four years for employment tax records under the IRS rule, and longer where an industry rule cited above says so.
What does managed payroll cost for a nonprofit?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Grant-funded payroll allocation, clergy housing allowance and FUTA exemptions are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Nonprofits & Religious Organizations. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
From the blog