Why It's Okay to Cover Nonprofit Salaries with Grant Funding

By Laura Chynoweth, CEO of Granted

The Importance of Paid Staff
Before we talk about grant funding, let’s back up and acknowledge that nonprofit employees should indeed be paid for their work. When many people think about nonprofit organizations, they often picture volunteers working tirelessly to make a positive impact. While volunteerism is the backbone of many nonprofits, paid staff are a key component that are often overlooked. Offering paid positions is a reflection of responsible management. Nonprofits that rely on volunteers for an extended period of time are at risk of stalling out and losing continuity in program delivery and if/when those volunteers burn out.

The Importance of Well Paid Staff
Nonprofit organizations are often run by individuals who have a deep passion for their mission, whether it's improving education, addressing environmental issues, or providing social services. However, to run an effective organization that can achieve lasting results, skilled professionals are needed. Just like for-profit businesses, nonprofits require qualified staff members—whether it’s project managers, grant writers, or executive directors—who possess the expertise to make the organization’s goals a reality.

One of the biggest challenges for nonprofits is competing with the private sector for skilled workers. Professionals in fields like marketing, finance, and program management can often earn higher salaries working for businesses or government agencies than they can at nonprofit organizations. For some reason, our society accepts (and expects) that tech CEOs will be paid handsomely while nonprofit workers must sacrifice high wages for the personal fulfillment they gain from contributing to their communities. It’s time to flip the script.

Why (Most) Grant Funding is Appropriate and Ethical for Salaries
The funding that pays salaries for nonprofit staff members can be derived from grants. But there is an ongoing debate in some circles about whether grant funding should be used to cover salaries. The truth is, not only is it okay to use grant funds for nonprofit salaries (as long as specific grant guidelines allow), it’s absolutely necessary for the long-term success of the organization and the fulfillment of its mission. Here are some reasons why:

1. It sustains operations.
   Many grants are given with the intention of supporting the operations of a nonprofit, and operations inherently include personnel costs. The purpose of a grant is to fund the necessary resources to help the organization meet its goals, and people are key to making those goals happen. Whether it’s a program coordinator running a service or an executive director overseeing strategic initiatives, people make the impact. By covering salaries, grant funding ensures that the nonprofit can continue to operate effectively.
   
   
2. It sustains programs.
   In addition to seeking grants to support general operations, nonprofits often seek grants for specific projects or initiatives. As with operations, these projects do not just incur direct costs (e.g., materials and supplies); they also require indirect costs (e.g., staff to run them). Without proper staffing, even the most well-funded programs can fall apart. For example, if a nonprofit is awarded a grant to fund a literacy program for underprivileged children, the grant money might need to cover salaries for the program’s instructors, coordinators, and administrative staff. Without these individuals, the program wouldn’t exist. Using grant funds for salaries (or at least the portion of these individuals’ salaries that covers the time they spend on a specific project) is an essential part of ensuring that the program is successfully implemented and sustained.
   
   
3. It helps attract and retain talent.
   As previously mentioned, nonprofits must find a way to offer competitive compensation to attract and retain top talent, which is critical to their success. Grant funding offers a way to do that. Grants may act as supplementary income for a nonprofit and allow the organization to offer salaries that are competitive and reflective of the work being done, which helps the organization attract the right people.
   
   
4. It's transparent and accountable.
   Grantmakers often expect nonprofits to provide a breakdown of how grant funds will be used. In this context, including salaries in a budget isn’t just acceptable—it’s expected. A transparent budget shows how the funds will be allocated for both program costs and administrative costs, including personnel. While the nonprofit sector is still fighting the “overhead myth,” more funders than ever before now understand that running a nonprofit is a complex task that requires both programmatic and administrative support, and compensating staff for their work is a necessary part of that. Bonus: When nonprofits are transparent and explain how grant funds will be used to achieve measurable outcomes, donors are more likely to support them.
   
   

The Bottom Line
Nonprofits are essential to addressing social issues and improving communities. To be effective, they need the right people in place to drive their mission forward. Grant funding isn’t just about paying for the project—it’s about paying for the resources (including the people) that make that project a reality. Remember: It’s okay to get paid to do good things. 

Notes: 

Make sure the guidelines of the specific grant you are pursuing specify that award funds may be used for salaries. If they explicitly state that award funds cannot be used for salaries, remember that the application is not the place to try to educate the funder on why this is a mistake. If the guidelines do not address whether salaries may be covered by grant funds, reach out to the potential funder to ask for more information.

If you are applying for a grant for a specific program, make sure you include only the portion of each staff member’s salary that reflects the time they will spend delivering the program.