Volunteer labor in the nonprofit sector

Introduction

For many nonprofits, volunteer labor is imperative to achieving their mission. Volunteer labor enables nonprofits to expand their reach, reduce operational costs, and leverage diverse skills. Recognizing which types of nonprofits depend on volunteers to carry out their missions, along with the nuances of what constitutes a volunteer, can help surface trends among volunteer-dependent nonprofits. Over 216,000 nonprofits reported having at least one volunteer in their most recently available financial disclosures (the Form 990), but how are these volunteers defined and reported, and which types of nonprofits rely on volunteer labor?

What is the definition of a volunteer?

Understanding how a volunteer is defined is valuable when assessing organizations that are highly dependent on volunteer labor. A volunteer is generally defined as someone who performs work for a nonprofit without receiving any compensation or significant benefits in return. The IRS does not provide a specific definition of a volunteer on the Form 990 or its official instructions. Nonprofits must determine who is considered a volunteer at their organization and will report various kinds of volunteer roles including:

• Board Members: Members of the board of directors who serve without pay are counted as volunteers.
• Occasional volunteers: Individuals who volunteer occasionally (e.g., at annual events).
• Regular Volunteers: Individuals who contribute regularly (e.g., weekly or monthly).

Determining how to classify someone who performs mission critical work at no cost for a nonprofit can be difficult. Tax-exempt organizations often consider individuals assisting with their exempt purpose as "volunteers”, but legally, these individuals may qualify as "unpaid employees”. According to BDO, misclassifying an unpaid employee as a volunteer can lead to adverse tax implications for both the worker and the organization.

To classify someone as a volunteer, BDO states:

• They should not receive compensation resembling wages or benefits for services rendered.
• Their work should be discretionary or supplementary, not routine or supervised like that of a regular employee.
• They should operate independently of an employment-like structure and not rely on the arrangement for financial benefit or reimbursement beyond incidental expenses.

If these factors align more closely with employee characteristics — such as working defined schedules with heavy supervision, while getting reimbursed for any incidental expenses — the individual is likely an unpaid employee rather than a volunteer. However, this does not mean that volunteers cannot receive some benefits for their work. Many nonprofits provide volunteers with small appreciation gifts, food and beverages during their volunteer hours, and equipment or training necessary to perform their volunteer work.

How are volunteers reported by nonprofits?

Nonprofits in the United States are required to disclose the number of volunteers on the full Form 990, Part I, Line 6. This requirement only applies to tax-exempt organizations that file the full Form 990. Form 990-EZ (the shorter version of the form) filers and Form 990-PF (private foundation) filers do not report the number of volunteers. Similarly, organizations that file Form 990-N (e-Postcard), typically those with gross receipts of $50,000 or less, do not report volunteer numbers. In addition, the IRS does not specify how volunteer numbers should be calculated or verified. Nonprofits often report an estimated number.

According to the IRS volunteers reported on the Form 990 do not need to have specific volunteer hours tracked or any formal arrangement with the nonprofits they volunteer for, but they must provide services directly supporting the organization's mission or operations.

Characteristics of nonprofits with volunteer involvement

The charts below breakdown the top 20 NTEE (National Taxonomy of Exempt Entities) codes for two kinds of nonprofits. The first chart covers nonprofits run by volunteers, which are organizations with no employees and at least one volunteer, as reported in their most recent tax year. The second chart looks at nonprofits with volunteer support, which are organizations with at least one employee and at least one volunteer, as reported in their most recent tax year.

Volunteers can have different types of involvement at nonprofits based on how the organization utilizes their labor. Nonprofits may depend on volunteers for daily operations or engage them in roles outside of operations to support their missions. However, these roles aren't mutually exclusive—a nonprofit can rely on volunteers for operational tasks while also employing full-time staff. Likewise, a volunteer-run nonprofit might still involve volunteers in non-operational capacities.

217,204 nonprofits report having at least one volunteer. Of these, 85,002 are completely run by volunteers, where the nonprofit has no paid employees, and 131,931 nonprofits are supported by volunteers, where the nonprofit has both paid full-time employees and volunteers. Nonprofits that are run by volunteers report 14 million people volunteering at them, whereas nonprofits that also have full-time employees report 108 million people volunteering at them (with many people presumably volunteering at multiple different organizations). So, while about 40% of nonprofits that use volunteers are also completely run by volunteers, these volunteer-run nonprofits only use 12% of all the people volunteering at nonprofits. The vast majority of volunteer opportunities are at nonprofits that are professionally run by full-time employees.

Analyzing trends among the types of volunteer-run and volunteer-supported nonprofits, seven NTEE codes appear in both of the top 20 lists for volunteer-run nonprofits and volunteer-supported nonprofits. These NTEE codes cover a wide range of nonprofits, including animal shelters, fraternal societies, and trade / professional associations. One way to interpret this connection is to consider that a given NTEE code, such as animal shelters (D20), may have both larger nonprofits with professionalized staffs and small nonprofits with much smaller budgets and no full-time employees.

A few types of organizations are almost always run by volunteers, such as volunteer fire departments, PTAs, amateur sports leagues, and student-led organizations. In contrast, some types of volunteering is only at nonprofits with full-time staff, such as schools, hospitals, and retirement facilities. A plurality of nonprofit types, though, are represented by both volunteer-run and volunteer-supported organizations.

Conclusion

Knowing how volunteers are defined and reported helps clarify the scale of volunteer contributions within the nonprofit sector. Seeing the breakdown of top NTEE codes for volunteer-run and volunteer-supported nonprofits highlights the different kinds of volunteer involvement that nonprofits rely on to fulfill their missions. This information is valuable for nonprofits seeking to compare their volunteer support with that of similar peer organizations, as well as for businesses looking to partner with organizations that could benefit from their services.