Labour Law & Hr Consultant
Partner - Risk Management
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Thread Started by #ShanthiL

I am trying to understand the compensation structure and benefits that are offered to employees in a NGO whether a Society or Trust or Sec 8 company. Organisations that I have spoken to say they do not provide the same and believe it is not applicable. However, my interpretation is that these organisations are establishments which have more than 20 employees (at least the one I spoke to) and hence it is applicable. Ideally, should be registered under respective Shops and Establishment Act.
One argument against Gratuity is we follow cash basis of accounting- which means we can't provide for it and project may not last 5 years and a new donor doesn't want to support the liability and the organisation doesn't have surplus funds to pay for it. Would request the experts to throw light on this. Thanks
5th January 2018 From India, Noida
Dear Shanthi,
Your interpretation is correct. Others may be under the wrong impression that since a charitable organization registered under the State Societies Registration Acts or u/s 8 or 25 of the Companies Act,2013 is a non-profit organization and is exempt from certain provisions of certain Laws like the Companies Act,2013, Income Tax Act etc., is also exempted from the Labor Laws of the country. If you read the interpretation of the term "industry " in the Supreme Court's historic judgment in Bangalore Water Supply & Sewerage Board v. A.Rajappa case which still holds good, what is important is the systematic co-operation between the employer and employees in the running of the organization for the purpose of satisfaction of human needs or wants. Even in case Spirituality is the main purpose, if certain activities of the organization are separable as analogous to industry, the "dominant nature test " has to be applied. Already societies registered under the Societies Registration Act are brought within the purview of the Payment of Gratuity Act,1972 by means of notification u/s 1(3)(c) of the Act.
The arguments said to be advanced are quite untenable. The financial commitments towards the lawful running of the organization can not be deleted from the budget to compute the surplusage of the funds of the organization. It is the effectiveness of the efforts of the trustees or directors of the organization to mobilise funds by other means if any donor is circumspect about the ways of the use of money donated by him.
5th January 2018 From India, Salem
When you deal with the doners and tell them how much you need for a project you need to include employees cost on CTC basis. If he asks for CTC breakup show statutory dues clearly
The doner probably does not care about statutory dues as it hardly affects or impacts him. But your organisation, directors and trustees as well as managers will be liable for prosecution. Is that a risk you want to take ?
The excuse that doner refused to give us definitively not acceptable to the courts
24th January 2018 From India, Mumbai
Constitution of the organisation does not affect entitlement to gratuity or other benefits like Maternity benefits etc.
There is an employer-employee relationship in the organisation.
Maintaining books on mercantile basis or cash basis or accrual basis is company decision and it cannot affect entitlement of Garatuity.
24th January 2018 From India, Pune
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