NGOs are not specifically exempt under EPF!

The Employees Provident Fund and Miscellaneous Provisions Act, 1952 is a Central Act applicable throughout India, to provide, retirement benefits to employees of organisations which employ 20 or more persons.

Charitable organisations or NGOs are required to comply under this law regardless the “good work” that they may be doing or “lack of funds”.

Organisations which employ less than 20 persons may choose to register under the Act, provided that the management and majority of the employees agree.

Under the Act, employees drawing wages (being Basic Wages plus Dearness Allowance) less than or equal to Rs. 15,000/- (up to year 2015 Rs. 6,500) per month are eligible for benefits under the Act. 

What about persons hired on contract?

We have observed that when the number of employees goes over twenty, quite a few NGOs, in order to avoid compliance under EPF, hire additional persons on ‘contract’. However, even those hired on contract for time-bound projects are deemed employees. What’s worse, such contracts are renewed year after year without any break at the end of the project or program, for several years!

When does a person hired on ‘contract’ become a deemed employee?

The following would be some crucial tests:

1.  The consultant is under the direct and exclusive control, supervisions and direction of the NGO.

2.  The consultant cannot work independently and does not have the liberty to enter into any other business or contract with another NGO or organization as long as he/she is engaged by your NGO.

3.  The consultant is engaged to perform duties that are core activities of the NGO and perennial in nature. This would indicate that the NGO has camouflaged the payment of wages under the guise of payment of consulting fee or remuneration.

4.  The fee or remuneration paid by the NGO to its consultant is in fact wages and tantamount to basic wages under the EPF Act.

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