Grant Writer Compensation: Can You Pay With Grant Money?

This article was provided by Learn Grant Writing.

Staffing shortages are pervasive across the nonprofit sector, and compensation is at the heart of the crisis. As a result, nonprofits often face a catch-22: They need more funding to hire staff, but they also need more staff to secure that funding in the first place.

Grants can offer a lifeline, but competitive proposals require the attention of a dedicated grant writer. This reality prompts an important question: Can grant funds be used to cover the cost of hiring a grant writer?

The short answer is no, but there are several other factors to consider. When you’re weighing the cost to hire a grant writer—or any new member of your nonprofit’s team, for that matter—you have to know where that money is coming from and how it fits into your overall budget. However, there’s more to paying your nonprofit’s staff than simply determining whether you can afford it.

In this guide, we’ll explore the considerations nonprofits must keep in mind when hiring a grant writer and share tips for building compliant budgets that withstand funder scrutiny.

The short and sweet version? No, paying a grant writer a percentage of the funding they help secure is never a good idea. Not only is this discouraged by most funders, but it can also raise ethical and compliance concerns. Learn Grant Writing puts it like this: “Grants are meant to support future, mission-related projects, not past expenses that arise from your fundraising efforts.”

Instead, nonprofits typically pay grant writers from:

• Cash on hand
• Unrestricted funds
• Individual donations
• General operating funds

They either pay an hourly rate or a flat fee for the entire project. However, several factors can influence the specific pay structure your organization chooses, primarily the nature of the grant writer’s engagement with your nonprofit.

Full-Time Grant Writers
Some nonprofits intentionally expand their teams to onboard a dedicated grant writer if they need a full-time employee in this area. In other cases, current nonprofit employees who want to support the organization’s fundraising efforts by writing grant proposals may transition into an internal grant writing role.

When hiring in-house grant writers, nonprofits are responsible for covering salary and benefits. This process also requires an effective human resources strategy to manage payroll over time. Altogether, you may incur the following additional costs:

• Talent acquisition costs: Screening and interviewing candidates can take time and resources, especially for a specialized role like grant writing.
• Onboarding and training: As new hires get acclimated to their positions, nonprofits must support them with grant-specific training before they can start contributing.
• Taxes: To comply with state regulations, nonprofits may be required to pay employment tax, workers’ compensation, and unemployment tax.

In-house nonprofit grant writers make an average base salary of around $64,000 per year, and if your nonprofit doesn’t already have an employee eager to fill this position, it may not be a feasible expense to add to your books. Instead, many organizations hire freelance or contract grant writers for specific projects.

Freelance or Contract Grant Writers
If your nonprofit decides to hire a grant writer externally, you’ll first need to understand what services you need. Some grant writers develop full grant proposals and reports, while others just create proposal templates for the nonprofit’s staff to customize. Grant writers can do a lot, but not all of them will do everything.

Freelance or contract grant writers’ fees will correlate with the services they provide, but they’re generally paid through one of two approaches:

• Hourly rates: Fair hourly rates for grant writers range from $50 to $75 per hour, depending on their level of experience and services offered. Straightforward foundation grants can take 20-40 hours of work, while more complex federal grants easily take 200+ hours and a full team. Even still, some proposals can take longer than expected, resulting in unpredictable total costs for your nonprofit. These costs, combined with other overhead expenses, can quickly add up, so careful budgeting is essential.
• Project-based rates: External grant writers may provide a quote that includes the complete cost they’d charge for your nonprofit’s desired scope of work. Again, the amount charged will depend on the writer’s experience and the extent of the services they’ll provide. This approach, also referred to as a “flat fee structure,” can be paid out in a few different ways. Nonprofits can pay upon completion of the project, in monthly increments, or half up-front and half upon completion.

Project-based rates are the preferred method for both nonprofits and grant writers because they provide clarity around shared expectations.

In either structure, careful compensation is critical to attracting top talent and complying with nonprofit regulations. Astron Solutions’ compensation research warns that nonprofits must develop competitive compensation packages without risking intermediate sanctions from the IRS.

Knowing that you shouldn’t pay a grant writer using funds from the grant itself, you may be wondering where you’ll find the money to compensate a grant writer. As mentioned above, your nonprofit can cover these expenses using cash on hand, unrestricted funds, or general operating funds, but you must properly budget for and record these costs.

Here are a few tips for budgeting grant writing costs:

• Outline your specific grant writing needs. Do you need someone to help with one complicated federal grant application, or are you looking for an expert’s oversight for several grants? Determine whether you need an in-house or freelance writer, and choose the fee structure you’re comfortable following.
• Account for related expenses. Identify any related costs you might be responsible for, such as AI solutions to support your grant writer’s work or training materials for new hires. Also, budget for non-monetary resources your nonprofit will use during this process, such as a specific amount of staff time you’ll dedicate to training.
• Align grant writing costs with your overall budget. Depending on your nonprofit’s financial flexibility, you may need to base your grant writing plans on your available budget. For example, perhaps you’ll keep costs low by hiring an external grant writer to provide a proposal template, then training an existing staff member to fully write the proposal.

If you have questions about fundraising compliance, grant reporting, or other regulations surrounding the grant writing process, it’s best to consult an expert. They can help you manage, record, and use grants effectively so you retain your 501(c)(3) status and maximize your fundraising dollars.

In short, grant writer compensation should never come from the grant funding that’s awarded. However, hiring a skilled grant writer can be a smart investment, and nonprofits should bake this expense into their budgets well ahead of submitting their proposals. With the right preparation, your organization can acquire much-needed funding while staying aligned with financial best practices and funder expectations.