Can NGOs Legally Provide Contract Labor to Organizations? Seeking Your Insights

Hi,

Can any NGO provide skilled/unskilled contract labor to any organization? If an organization forms an NGO and employs labor on a contract basis through the NGO, is it legally correct? Please give your views on this.

Thank you and Regards,
Sanjay

Good question, Sanjay. Can the government supply contract labour? It does. Study the Ethical Trading Initiative guidelines for homeworkers; it will give you a better picture of the unorganized sector. Meet people from a couple of organizations, e.g., Mahila Mandal, SEWA (the sole union, which is a cooperative), who dwell in the same sphere.

Let me update you on a recent ruling too: a NGO engaged in providing domestic help was charged and penalized under the Consumer Protection Act after one of the domestic hires engaged in theft.

Sanjay

Thank you, Sanjay.

Can you provide me details of the said case? Let me give a clearer picture to the forum. A construction company wants to hire contract laborers for various site constructions. They have also formed an NGO for a social cause. They do not want to hire laborers through a labor contractor but want to hire through the NGO so that the NGO can earn some profit and labor issues can be minimized.

My question is: can the NGO hire laborers on their role and supply them to the construction company as contract laborers? Please give your opinions.

Regards, Sanjay

Dear Sardhar,

Please read the question carefully and then do the cut and paste exercise.

Surya

Sanjay,

If you initiate and help the workers in forming a cooperative/forum/union and outsource work to that body to prevent exploitation of workers, then it is a capacity-building/poverty alleviation program that can also be included in CSR initiatives.

On the reverse side, workers can also form groups on their own, and work can be outsourced to them.

The Ethical Trading Initiative (ETI) for homeworkers emphasizes such exercises. In the garment trade, there are plenty of poor/destitute women engaged in embroidery work at home. The work reaches them through the hands of scores of contractors.

ETI wants the principal employers to map the entire value chain so that end workers can be identified, and their conditions can be improved.

We encourage workers to gather at a common place like a Panchayat Bhavan in a village and do their work there.

ETI also talks about multi-stakeholder initiatives. For example, we aim to provide medical insurance to the unorganized sector.

All players in the value chain, including the end workers, contribute their share, which is quite small, approximately 200/- per annum, even cheaper than ESI.

Next, you can encourage them to form a "Bank/Microcredit facility" too.

Keep us updated so that everyone can learn.

Surya

(Mr. Sardar, if I have hurt you, then please accept my apologies)

Hi Peer & Surya,

The company has already formed an NGO for other social causes. My question is whether the said NGO can hire laborers on its own and supply them to the construction company as contract laborers.

Regards,
Sanjay

Dear Sanjay,

I am quite doubtful about this case. How can an NGO supply the contract worker? If you do this, where will the service tax go, and what about the TDS, which differs according to the category of the contractor?

I will still check the details and revert to you soon.

Regards,
Nirmal Kumar Sahu

Hi,

What does NGO mean? Is the purpose of an NGO to earn a profit, or is it for social causes? The answer to this question will automatically answer your question.

If it's a government-aided NGO, then prior permission from the regulatory body is required. If they aren't aided by the government, then all they have to do is get themselves registered before supplying contract labor.

However, if they are aided, then they can't provide contract labor because they already receive government funds.

Hi,

Thank you for the inputs.

The NGO is formed for a social cause. It is not aided by the government. We can amend the Memorandum and alter the purpose and funding clause.

Regards,
Sanjay

There is a difference between the constitution of an NGO and that of a contractor. Since you already have an NGO, consider using it as a "strategic measure" rather than a tactical exercise. Form self-help groups of workers and establish a contract with those SHGs.

Secondly, keep the NGO as an independent unit. Do not interfere in the routine functioning of the NGO and utilize it to fulfill your CSR requirements in the long run.

Surya

An NGO cannot hire laborers on its own and supply them to the construction company as contract laborers.

Thank you.