Can Educational Institutes Legally Shift Employees to Contracts During a Pandemic?

Can an educational institute come under the Companies Act?

Can an educational institute, i.e., conducting vocational courses, come under the Companies Act? If so, should at least 50% of employees need to be on the payroll? Does a pandemic situation allow it to migrate all its employees to contract then? Please guide and advise—your help is highly appreciated. I am a payroll employee since January 2020 at an educational institute with PF and gratuity benefits. Now the management wants to migrate us into contract for a period of 1 year due to the pandemic, wherein the revenue source has only been course fees. The contract letter contents informed me, for example:

I am earning Rs 100 p.m., but it is not mentioned as they verbally informed us that there would be a 30% pay cut for 2021-2022 (Rs 30 will not be given at all).

Contract details and concerns

It mentions Rs 70 is what I will earn, out of which:
- Rs 30 would be given on a monthly basis (no definite time... it has always been delayed in the past year as well).
- Rs 40 would be based on revenue collection, i.e., fees collected from students who are solely dependent on the same; otherwise, the management is not liable to pay me this as well.

In such a scenario, should I accept a contract letter?

Reasons for declining the contract

Based on my analysis of the situation, I have declined to accept it for the following reasons:
1. It has to mention Rs 100 as my original salary, and Rs 30 is not being met due to a financial crisis.
2. It has to mention that all employees are not being put on the payroll. (I can't believe this as per the Companies Act, some need to be on the payroll.)

I would seek advisors' review on this case and to enlighten me further to take further steps and stance towards the management.

Thanks in advance.

Educational institutions and the Companies Act, 2013

Educational institutions can be registered under the Companies Act, 2013, but this does not apply to employees employed therein.

Conversion of regular employees to contract employees

The practice of converting regular employees to contract employees unilaterally by the employer is illegal.

Salary and employment contract terms

Whatever salary is fixed in the contract of employment should be paid minus legal deductions like the employee's share of contribution to EPF. Any proposed cut in salary amounts to a change in the terms and conditions, which requires the acceptance of the employee.

Decision-making in employment offers

If you are in dire necessity of this job, you can accept the offer. Otherwise, you can simply reject it in toto; it is up to your choice.

Understanding Employment Structure and Retrenchment

There is no connection between the work done (vocational guidance) and whether it is under the Companies Act (for which it needs to be a company). You need to specify what the structure of your employer is.

There is also no requirement under any law that there has to be a certain number of fixed employees. Contracted employees and service providers are the accepted norms today.

You need to evaluate the option before you. If you refuse to accept the new format, they are free to terminate you. Retrenchment compensation for you will be a month's pay, which is nothing. The employer can easily retrench in view of the current economic scenario. I do not think there are more than 300 employees, and therefore restrictions under the Industrial Dispute Act on retrenchment will not apply.

If you do accept the changes, then well, what you earn depends on the students. It makes more sense if you are a trainer and if your performance ensures students sign up. In the end, it is an economic decision. And the courts are unlikely to help you, especially in the short term.