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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