Free payroll software for nonprofits: 5 options that work in 2026

Nonprofits run payroll like any employer (wages, withholding, direct deposit, quarterly filings), but the budget is tighter and the rules have a few differences. Section 501(c)(3) organizations are exempt from federal unemployment tax (FUTA), many need to allocate salaries across grants and programs, and Form 990 requires compensation disclosure for officers and key employees. This page covers five payroll tools that either offer nonprofit discounts or are affordable enough that a small nonprofit can run payroll without eating into program funds.

Short answer

Wave is the closest to free: its accounting is free and its payroll starts at $40 per month plus $6 per employee. Gusto offers a nonprofit discount (typically 15-25% off) and handles FUTA exemption, multi-state filing, and benefits. OnPay at $49 per month plus $6 per person includes multi-state payroll with no extra fees. Paylocity is built for mid-size nonprofits with grant-funded salary allocation. QuickBooks Payroll bundles tightly with QuickBooks Online, which many nonprofit accountants already use.

Written by Rajat GuptaFact-checked by Chandrasmita

Prices and plan limits checked on each vendor's own website on September 25, 2026. Vendors change pricing often, so confirm on their site before you buy.

Sources we used

We rely on vendor documentation, pricing pages and other primary sources. We do not use G2 or Capterra ratings as ranking inputs.

Primary sources

Official vendor documentation, pricing pages, help centers, and release notes
Public analyst reports, market commentary, and relevant public filings
Practitioner discussions in communities such as Reddit

What we exclude

G2 and Capterra ratings as ranking inputs
Vendor-submitted claims that cannot be corroborated publicly
Anonymous summary statements presented as proof without a primary source behind them

Review standard

Material corrections can be submitted through the contact page. We update pages when a claim can be verified against a stronger source.

Read the full review methodology and sponsored disclosure.

Evidence used on this page

Payroll Software buyer's guide: The full category overview, evaluation criteria and tool list.
Best Payroll Software: Our ranked shortlist for the category.

Top pick for each nonprofit situation

1. Small nonprofits that want full-service payroll with a nonprofit discount
Gusto
2. Very small nonprofits that want the lowest total cost
Wave Payroll
3. Nonprofits with employees in multiple states
OnPay
4. Mid-size nonprofits that need grant-funded salary allocation
Paylocity
5. Nonprofits whose accountant already works in QuickBooks
QuickBooks Payroll

Nonprofit payroll software compared

Prices from each vendor's site or confirmed via nonprofit sales channels, as of September 2026. Nonprofit discounts vary by organization size and are not always published.

Tool	Price	Free plan or trial	Best for	Key limitation
Gusto	Simple plan $40/mo + $6/person; Plus $80/mo + $12/person. Nonprofit discount typically 15-25% off (contact sales)	No free plan. First month often waived for new customers.	Nonprofits with 5-50 employees that need benefits administration alongside payroll	Nonprofit discount is not published on the website; you need to contact sales to confirm your rate
Wave Payroll	$40/mo + $6 per employee + $6 per contractor paid. Wave accounting is free.	Accounting is free. Payroll has a 30-day trial starting with your first payroll run.	Nonprofits with fewer than 10 employees already using Wave for bookkeeping	No benefits administration; no 403(b) integration; limited grant allocation features
OnPay	$49/mo + $6 per person. First month free for new customers.	First month free. No ongoing free plan.	Nonprofits with remote staff or satellite offices across several states	No published nonprofit discount; higher base fee than Gusto Simple
Paylocity	Quote-based. Typically $4-7 per employee per month plus implementation fee.	No free plan or trial. Demo available.	Nonprofits with 50+ employees and complex grant reporting requirements	Not cost-effective for small nonprofits; implementation fees can reach $1,000-5,000; pricing is opaque
QuickBooks Payroll	Payroll Core $50/mo + $6/employee; Premium $80/mo + $8/employee; Elite $125/mo + $10/employee	No free plan. 50% off for the first 3 months is frequently offered.	Nonprofits using QuickBooks Online for accounting that want a single vendor for books and payroll	No published nonprofit discount; more expensive than Gusto or OnPay at the same headcount; grant allocation requires manual class tracking in QBO

The shortlist, ranked

Top pick for: Small nonprofits that want full-service payroll with a nonprofit discount

1. Gusto

Gusto is the most commonly recommended payroll platform for small nonprofits, and for good reason. It handles the FUTA exemption for 501(c)(3) organizations, files federal and state payroll taxes in all 50 states, and runs direct deposit on a two-day or next-day schedule depending on your plan.

The nonprofit discount is real but unpublished. Gusto's sales team typically offers 15-25% off the standard pricing for verified 501(c)(3) organizations. On the Simple plan, that brings the effective cost to roughly $30-34 per month plus $4.50-5.10 per employee.

Beyond payroll, Gusto handles health insurance, 403(b) retirement plans (the nonprofit equivalent of 401(k)), workers' comp, and HR basics. If your nonprofit offers benefits, bundling them with payroll in Gusto is simpler than managing separate vendors. See our full [Gusto review](/software/gusto) for details.

Read our Gusto profile

Top pick for: Very small nonprofits that want the lowest total cost

2. Wave Payroll

Wave's accounting software is genuinely free, and its payroll service covers all 50 US states for tax filing. For a very small nonprofit already keeping books in Wave, adding payroll at $40 per month plus $6 per employee keeps the total software cost lower than almost any alternative.

The limitation is depth. Wave Payroll does not offer health insurance, retirement plan administration, or built-in grant allocation. If your nonprofit needs to split an employee's salary across three grants, you will track that allocation in your accounting system or a spreadsheet, not in Wave's payroll module.

For a nonprofit with 5 employees, Wave Payroll costs $70 per month. Gusto's Simple plan with a 20% nonprofit discount costs roughly $57 per month for the same headcount, and includes benefits administration. Wave wins on total cost only if you are already using its free accounting and don't need benefits. See our [Wave review](/software/wave) for the full picture.

Read our Wave Payroll profile

Top pick for: Nonprofits with employees in multiple states

3. OnPay

OnPay charges $49 per month plus $6 per person and includes multi-state payroll at no extra cost. For a nonprofit with program staff scattered across states (common in advocacy, research, and service organizations), OnPay avoids the per-state surcharges that some competitors tack on.

OnPay handles the FUTA exemption for 501(c)(3) organizations and files all federal, state, and local payroll taxes. It also supports health insurance, 401(k) and 403(b) retirement plans, and workers' compensation integration.

The first month is free, which gives you a real payroll run to evaluate the system before committing. For a 10-person nonprofit, OnPay costs $109 per month, straightforward and predictable. Read our [OnPay review](/software/onpay) for a deeper look.

Read our OnPay profile

Top pick for: Mid-size nonprofits that need grant-funded salary allocation

4. Paylocity

Paylocity is a mid-market payroll and HCM platform that serves a significant number of nonprofit clients. Its labor allocation features let you split an employee's pay across multiple funding sources (grants, programs, departments) and report on those allocations for grant compliance.

For nonprofits preparing Form 990, Paylocity's reporting tools can pull the compensation data for officers, directors, and key employees that Schedule J requires. The platform also handles multi-state tax filing, benefits administration, time tracking, and onboarding.

Paylocity makes sense for nonprofits with 50 or more employees where the per-employee cost ($4-7 per month) is competitive with Gusto or OnPay and the grant allocation features save real staff time. For smaller nonprofits, the implementation fee and minimum contract make it more expensive than the alternatives. See our [Paylocity review](/software/paylocity) for more detail.

Read our Paylocity profile

Top pick for: Nonprofits whose accountant already works in QuickBooks

5. QuickBooks Payroll

QuickBooks Payroll integrates directly with QuickBooks Online, which is the accounting software many nonprofit bookkeepers and accountants already know. If your nonprofit runs on QBO, adding QuickBooks Payroll means payroll journal entries post automatically to your general ledger with no CSV imports or manual entry.

The Payroll Core plan at $50 per month plus $6 per employee covers automated tax filing and direct deposit in all 50 states. Premium adds same-day direct deposit and workers' comp administration. Elite adds tax penalty protection and a personal HR advisor.

Grant allocation is not built into QuickBooks Payroll directly. You handle it by assigning payroll expenses to classes or projects in QuickBooks Online, which works but requires discipline. For complex multi-grant allocation, [Paylocity](/software/paylocity) is a better fit. See our [QuickBooks review](/software/quickbooks) for the complete breakdown.

Read our QuickBooks Payroll profile

Do nonprofits need special payroll software?

No. Any payroll software that handles FUTA correctly can run nonprofit payroll. The IRS exempts 501(c)(3) organizations from FUTA (the 6% federal unemployment tax on the first $7,000 of each employee's wages). Most payroll platforms have a setting for this, but you need to confirm it is set correctly, because the default is to withhold FUTA.

Where nonprofits diverge from for-profit businesses is in three areas: salary allocation to grants and programs, Form 990 compensation reporting, and the availability of 403(b) retirement plans instead of 401(k). None of these require specialized payroll software, but some platforms handle them more smoothly than others.

What payroll features do nonprofits need?

Every nonprofit needs the basics: accurate tax calculation, automated federal and state tax filing, direct deposit, W-2 and 1099 generation, and the FUTA exemption setting for 501(c)(3) status.

Grant-funded nonprofits also need labor cost allocation: the ability to split one employee's salary across multiple grants or programs and report those splits for grant compliance. This is critical for federal grants subject to OMB Uniform Guidance (2 CFR 200).

Nonprofits filing Form 990 need to report compensation for officers, directors, trustees, and key employees on Schedule J. Payroll software that can generate this data saves hours of manual compilation during tax season.

Finally, nonprofits offering retirement benefits need 403(b) plan support, not just 401(k). Not every payroll platform supports 403(b) deductions and employer contributions natively.

Can nonprofits use free payroll software?

Technically, yes. Payroll4Free works for any employer with 9 or fewer people paid once a month, but you deposit and file the taxes yourself, which is risky if no one on staff knows the payroll tax calendar. For most nonprofits, the liability exposure of missed tax deposits outweighs the savings.

The more practical path is a low-cost full-service payroll: Wave at $40 per month plus $6 per employee, or Gusto with a nonprofit discount bringing the effective cost to roughly $30-34 per month base. These platforms file and deposit taxes on your behalf, which removes the compliance risk.

If your nonprofit has a fiscal sponsor, check whether the sponsor offers payroll as part of their services. Many fiscal sponsors run payroll for their sponsored projects, which can be the cheapest option of all.

Frequently asked questions

Do nonprofits need special payroll software?

No. Any payroll platform that correctly handles the FUTA exemption for 501(c)(3) organizations can run nonprofit payroll. The differences are in grant-funded salary allocation, Form 990 compensation reporting, and 403(b) retirement plan support, features that some platforms handle better than others.

What payroll features do nonprofits need?

At minimum: automated tax filing, direct deposit, the FUTA exemption for 501(c)(3) status, and W-2/1099 generation. Grant-funded nonprofits also need labor cost allocation across funding sources. Organizations filing Form 990 need compensation data for officers and key employees.

Can nonprofits use free payroll software?

Payroll4Free is free for up to 9 employees paid monthly, but you file taxes yourself. For most nonprofits, a low-cost full-service option like Wave ($40/mo + $6/employee) or Gusto with a nonprofit discount ($30-34/mo base) is safer because taxes are filed and deposited automatically.

Are nonprofits exempt from payroll taxes?

501(c)(3) organizations are exempt from FUTA (federal unemployment tax) but must still withhold and pay federal income tax, Social Security, and Medicare from employee wages. Most states also exempt 501(c)(3) organizations from state unemployment tax (SUTA), though the rules vary by state.

Does Gusto offer a nonprofit discount?

Yes. Gusto offers a nonprofit discount for verified 501(c)(3) organizations, typically 15-25% off standard pricing. The discount is not published on their website. Contact Gusto's sales team to request nonprofit pricing.

What is the cheapest payroll option for a small nonprofit?

For a nonprofit with 5 employees, Wave Payroll costs about $70 per month (including free accounting). Gusto with a 20% nonprofit discount costs roughly $57 per month for the same headcount and includes benefits administration. OnPay costs $79 per month with the first month free.