India’s Labour Laws : A Primer for Non-Profits & its Stakeholders

In India, the scope of non-profit organisations (NPOs, also known as non-governmental organisations or NGOs) is wide and diverse. Their contribution to society is significant. Such organisations are usually set up to serve a specific cause, vocation, or community which they address through their charitable objectives.

There are about 1.67 lakh NGOs across 37 states operating in India in 42 different sectors as per the NGO Darpan portal of the NITI Aayog[1]. Assuming an average of 20 employees per NGO, this means more than 33 lakh resources employed in this sector. As such, NGOs are fast emerging as competitive employers.

As per an Institute which identified the ten best NGOs in India, the average strength of employee in these NGOs was around 466 and 53% of them were women. Many of the NGOs are being run as rigorously as for-profit organizations, incorporating practices such as compensation benchmarking, performance management and training-need analysis for all employees[2]. As these numbers keep growing, it becomes important for these employers to be aware of the legal compliances they are required to meet.

Labour laws in India

Labour laws regulate the employment relationship between employer and employee in an organization. By and large these cover industrial relations, labour management relations, and unfair labour practices, as well as holidays, annual leave, working hours, unfair dismissals, minimum wage, layoff procedures and severance pay, and many other issues related to employer and employee, as well as the various connected compliance requirements. Currently, there are about 29 laws covering the above aspects. With the objective of consolidation and labour reform to facilitate the ease of doing business the government has enacted four new labour codes which subsumes the 29 labour laws.  However, the codes are yet to be implemented.

Are non-profit organizations exempt from labour laws?

As many judgments (including one of the Madras High Court discussed below) show, a common defence that is used by NPOs in India is they are exempted from adhering to key compliances as they are working for the larger good of the society, and that they are engaged in philanthropic activities and are not earning any profits from their activities. These contentions have been presented before courts on multiple occasions. However, the judiciary’s view of applicability of labour legislation, especially The Industrial Disputes Act, 1947 to NPOs is worth examining.

The Industrial Disputes Act is applicable only to an Industry as defined by it in Section 2 (j), as any business, trade, undertaking, manufacture or calling of employers and including any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.

The Supreme Court considered the interpretation of Industry in Bangalore Water Supply & Sewerage Board vs. A. Rajappa and ors[3], in which it set up a triple test to determine whether an enterprise is an ‘industry. This test was (i) systematic activity, (ii)organized by cooperation between employer and employee, (iii)for the production and/or distribution of goods and services calculated to satisfy human wants and wishes. Crucially, the Supreme Court held that the absence of profit motive or gainful objective is irrelevant, regardless of the sector the enterprise is in. The true focus is functional and the decisive test is the nature of the activity with specific emphasis on the employer-employee relations. If the organization is trade or business it does not cease to be one because of philanthropy animating the undertaking.

This judgment was followed in many other judgments, including in the case of S. Thilagavathi vs The Presiding Officer, Labour Court, Madurai & Ors[4] where the Madras High Court held that the Madurai Children Aid Society was an ‘industry’ for the purposes of the Industrial Disputes Act, 1947 and thereby subject to the labour laws. The High Court also held that professions, clubs, educational institutions, cooperatives, research institutes, charitable projects and other kindred adventures would also fall within the definition of industry.

The result of the Court rulings and the provisions of the legislations themselves is that most labour laws apply to NPOs. Some of these are discussed below.

Applicability of the Payment of Wages Act:

The Payment of Wages Act ensures the timely payment of wages to workers and defines an establishment as any place where manufacturing, trade, or business activities are carried out. Non-profit organizations may not engage in manufacturing or trade, but they do carry out business activities to achieve their social objectives.

Under this act, if a non-profit organization employs workers and pays them wages, it can be deemed an establishment, irrespective of its profit-making nature. Therefore, the Payment of Wages Act is likely to apply to non-profit organizations that have employees and pay them wages for their services.

Applicability of the Shops and Establishments Act (Karnataka):

The Karnataka Shops and Establishments Act, which regulates the working conditions of employees, defines an establishment as any place where commercial, trading, banking, or insurance activities take place, or services are rendered to customers. Non-profit organizations, even though they may not engage in commercial activities, may still fall within the purview of this act if they provide services or undertake any activities that fall under its ambit. Although the Karnataka Act is a state legislation, similar legislations exist in all States.

While the act does not specifically mention non-profit organizations, it broadly covers establishments where individuals are employed to carry out various functions. Consequently, if a non-profit organization employs workers to perform tasks related to its objectives, such as administration, accounting, or project management, it may be considered an establishment under this act, thus making the provisions of the act applicable to the organization and its employees.

The Act deals with crucial aspects of labour and employment like appointment orders, working hours, rest hours, overtime work and compensation, holidays & leaves.   Establishments must obtain a registration under the Act and must comply with the provisions of the Act even if it does not necessarily employee anyone.    

Applicability of Social Security Legislations:

In addition to the Shops and Establishments Act and the Payment of Wages Act, various social security legislations are in force in India to protect the welfare of workers. These legislations include the Employees’ Provident Funds and Miscellaneous Provisions Act, the Employees’ State Insurance Act, and the Maternity Benefit Act, among others.

The applicability of these social security legislations to non-profit organizations largely depends on the number of employees they have. For instance, the Employees’ Provident Funds and Miscellaneous Provisions Act applies to establishments employing 20 or more employees, while the Employees’ State Insurance Act applies to establishments with 10 or more employees. Therefore, if a non-profit organization has the requisite number of employees, regardless of whether or not it is an organization for profit, it will fall within the purview of these legislations, and the organization would be responsible for complying with their provisions.

Notable Implications of Labour Law Applicability:
  1. Service conditions to be on par or better than the ones prescribed in standing orders or law.
  2. Employees can approach appropriate labour forums in case of industrial disputes, such as non- payment of retrenchment compensation, unilateral change in service conditions etc.
  3. Employees will have the right to be compensated for any injury incurred during employment.
  4. Employers must contribute 3.25% of gross wages of eligible employees to the Employee’s State Insurance fund.
  5. Employers must match the provident fund contribution made by the employee which may not exceed 12% of provident fund wages.
  6. Employers should extend 26 weeks of paid holiday (maternity benefit) to eligible women employees. Provision of creche facility to employees.
  7. Employers should account for payment of gratuity to employees who render continuous service of five years.
  8. Employees will be eligible for sick, earned, national and festival holidays / leaves.
  9. If women employees are engaged for work between 8pm and 6am in Karnataka, door to door transportation with adequate security at the cost of employers should be provided.
  10. If employees are required to work beyond nine hours in day or forty-eight hours in a week, overtime wages at double the rate of regular wages should be paid.  
Labour Laws and CSR

It is essential for NGOs to comply with labour laws to attract CSR funding as such compliance is an indicator that the NGO is a suitable option for investment of CSR funds. Below are some of the reasons why companies can consider labour law compliance of NGOs as a crucial aspect of their due diligence process before providing CSR funds.

  1. Labour law compliance by NGOs supports United Nation’s Sustainable Development Goals (SDG) 8, which focuses on decent work and economic growth. By supporting NGOs that promote fair employment practices, companies contribute to sustainable development in line with global objectives.
  2. CSR activities serve as a means for companies to build their brand reputation and enhance their image. Instances of labour law violations by partner NGOs can tarnish a company’s reputation, resulting in public scrutiny, negative media coverage, and damage to stakeholder trust.
Non-compliances and its repercussions

The consequences of the applicability of labour laws are that non-compliance will lead to hefty penalties, damages and interest rates, criminal prosecution of office bearers / authorized signatories and imprisonment of directors. Further reputational risks can hamper the funding prospects of the NPOs/NGOs. 


Labour laws in India are primarily designed to protect the rights of workers it is crucial for non-profit organizations to carefully analyze their operations and consult legal experts to ensure compliance with relevant labour laws and safeguard the rights and welfare of their employees.

-Sumanth Nagaraj,
Senior Associates & Advocate

Share This Post

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top

Archana Madan – POSH Specialist & Advocate

Archana Madan Kohli is an advocate with close to 15 years experience in in-house and law firm roles. At BCP Associates, she specialises in providing various services to clients under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”). Archana is the External Member of the Internal Committee of multiple organizations across sectors and is well versed in handling POSH inquiries. She also handles POSH queries, including drafting and reviewing policies and assisting in setting up Internal Committees.

Archana is also a trainer, delivering specialised sessions for Managers and Senior Management, Employee General Awareness sessions for all employees and Internal Committee training. Apart from English, Archana is fluent in delivering training sessions in Hindi, and Punjabi.

Archana started her career with Bharti Infratel Limited moved on to Wipro Limited, Adecco India Private Limited, Cloudnine Hospitals, Virinchi Limited and Medicover Hospitals in different capacities.

Archana holds a Bachelor of Law (LL.B.) degree from Himachal Pradesh University, Shimla. She has earned her Post Graduate Diploma in Drafting, Negotiation and Enforcement of Contracts from NALSAR University of Law, Hyderabad with distinction.

B. Chandrashekar Shetty - Advocate

Mr. Chandrashekar Shetty is a Senior Labour Law Compliance Auditor at BCP Associates and has audited multiple client companies across India. He is also a member of our senior legal advisory practice. Previously he has worked as Deputy Controller, Manager-Industrial Relations and Industrial Relations Officer in KPTCL, Bangalore for more than 30 years. Prior to this, he has dealt with Legal, Personnel and IR matters including Wage Settlements, Grievance Machinery, Manpower Study and Social Security Compliances for about 10 years. He is a Faculty member of Labour Law, HRD Centre, KPTCL Bangalore.

Mr. Shetty holds a B.Com. and L.L.B. degree, Post-Graduate Diploma in Business Administration, Diploma in Public Relations from Bangalore University and PG Diploma in Industrial Relations & Personnel Management from Bharatiya Vidya Bhawan. He is enrolled as Advocate in Karnataka Bar Council and is a Govt. Arbitrator of Chit Funds in Karnataka.

S Venugopal Rao

S Venugopal Rao is an experienced labour law and service matters expert and is a member of the senior advisory team at BCP Associates. Having joined the chambers of Mr. B C Prabhakar in 2012, he is knowledgeable and well versed in multiple employment and labour law topics.

S Venugopal Rao holds a Bachelor’s degree in Science from Karnataka University, Dharwar and Bachelor of Law from Bangalore University. He enrolled as advocate in Karantaka State Bar Council in 1976. He joined the chamber of Sri. Kolachalam Srinivasa Rao a leading civil advocate. After practicing for 6 years at Ballari, he joined Orient Paper Mills, Orissa (of G P Birla Group). He was designated as Manager (Law) under the Factories Act in 1995. In 1999, he joined Andhra Pradesh Paper Mills Rajahmundry as Manager Legal and was subsequently elevated as Dy. General Manager (Legal). As Factory Manager & Legal Head, he oversaw compliance of Factories Act and Rules there under towards safety, health and welfare, including compliance under Pollutions and Environmental laws and Explosives Act, etc. Additionally, he is well acquainted with Environment Management System ISO 14001: 2004, Occupations, Health and Safety Series 18000:1999. As Legal head in APPM he has briefed and appeared along with Senior Advocate before Appellate Authority constituted under Water (Prevention & Control of Pollution) Act. He retired from the services of Andhra Pradesh Paper Mills in 2011.

As legal head he has handled important cases both in Labour and Civil and has experience in drafting and vetting Contracts, Agreements, Lease Agreement, Conveyance Deeds, , Affidavits and scrutiny of several legal and other documents, Preparing and settling Petitions, Appeals, Plaints, Written Statements, Rejoinders, Affidavits and Written Arguments etc. for submission/pleadings for various legal proceedings.

C K Devappa Gowda - Advocate

C.K. Devappa Gowda (CKD) is an Advocate and Labour Law expert. He holds a Bachelor’s Degree in Science from the University of Mysore and a Degree in Bachelor of Law from Bengaluru respectively. He also holds a Diploma in Social Service Administration from the National Institute of Social Science, Bengaluru. After completing his studies, he had enrolled as a Advocate and initially practiced in the Civil Code attached to the office of BCP. He then worked as Personnel Officer in Chemicals and Textile Manufacturing Industries for 5 years. Thereafter took up employment in one of the largest Public Sector Bank. He has worked in different parts of the country and has extensive experience in the cross country IR domain. The significant part of his service was at corporate level overseeing and implementing HR policies and practices and management of IR. He has been a member of personnel committee of Indian Bank Association.

After retirement from service, Mr. Gowda has been working with Mr. BC Prabhakar’s firm for the last 12 years. He has expertise in all areas of people management, drafting of documents relating to service matter including the settlements under the ID Act. He has dealt with all employment laws including appearance before the Courts, Tribunal and Authorities under the different Labour Laws. Mr. Gowda is one of the senior Labour Law experts at BCP Associates.

Srijatha Ghosh - POSH Specialist & Advocate

Srijata Ghosh serves as external member on the Internal Committee of several Companies across various sectors. She handles all kinds of POSH related matters including investigations and inquiries. She provides Training on Sexual Harassment across all verticals for Managers and Senior Management, General Awareness for all employees and Internal Committee members on the legislation (The Sexual Harassment of Women at Workplace Prevention, Prohibition and Redressal Act, 2013). She also formulates Policies for Prevention of Sexual Harassment at Workplace (“POSH”) and advises Companies on setting up of their Internal Committees. Srijata is involved in providing Legal Advisory services on POSH and other labour law matters for various clients.

In her previous experience, she has extensively dealt with End-to-End Contract Management, Due Diligence, POSH Compliances, Legal Advisory, etc. Srijata worked with Companies like Accenture India Private Limited, Quess Corp., Capgemini Business Services (India) Limited and Pramata Knowledge Solutions Private Limited. Srijata has handled varied legal issues including drafting, vetting and negotiation of contracts, drafting policies of various organizations. She has resolved issues relating to employment laws and has worked closely with the HR teams. She has provided legal advisory services to senior management. She was also associated with Kolkata High Court in counselling clients with legal matters such as Property, Due Diligence etc. Srijata has worked in an LPO Service Firm, Manthan Legal Services Private Limited for Legal Research, depositions, medical summaries, demand drafting etc.

Srijata completed her B.A.LL.B from M. S. Ramaiah College of Law, Bangalore University in 2009. Srijata is a member of the Karnataka Bar Council since 2010. She is also a member of the Gender Sensitivity Sub Committee of Karnataka Employer Association (KEA).

Caroline Lobo - POSH Specialist & Advocate

Caroline Lobo has been with BCP Associates for the past 2+ years. She has been handling matters and Inquiries related to the POSH Act including conducting inquiries and trainings/awareness programmes for Senior Management, employees as well as members of the Internal Committee on the POSH Legislation (The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Act”) to address Workplace Harassment of Women. She is a member of the Internal Committee for many varied companies and organisations and has reviewed and scrutinized numerous hearings and inquiries on matters relating to sexual harassment at workplace.

She has also handled matters relating to employer-employee related Enquiries, wherein she has reviewed and conducted hearings and enquired into the matters and has guided the Internal Committee and provided guidance in providing recommendations to the management. She is also a Member of the Gender Sensitivity Sub-committee of Karnataka Employer Association (KEA).

Prior to joining BCP Associates, Caroline has has a wide range of experience in corporate, commercial and contract law, mergers and acquisition and has undertaken drafting, vetting, negotiating and finalizing legal and commercial transactions. She started her career in litigation then moved onto the Corporate sector. In the span of 13 years, she has worked at Chambers of Advocate Jayashree Murali, Krishnamurthy and Co. Legal Consultants, Colt Technology Services and Oracle India Pvt. Ltd. She always had a keen interest in Women and Child related issues. She has worked with Child Welfare Committee and NGOS’s. In addition, she has worked with Swasthi Health Resource and Centre, where she was the External member to the Internal Committee (IC). She worked closely with the committee in strategizing, planning, reviewing and implementing the assigned tasks, which included building material to raise awareness against sexual harassment at workplace. Further, she has been involved in conducting inquiries into matters related to sexual harassment at workplace.

Caroline earned her Law degree from University Law College, Bangalore, from where she graduated in the year 2005.

Manoj Kumar – Senior Associate

At BCP Associates, Manoj Kumar is involved in managing and conducting labour law compliance audits of principal employer and contractors. He is also involved in client co-ordination and conducting labour law training programs for vendors. He has conducted on-ground labour law audit for factories. Manoj also provides support in advising vendor clients on labour law queries. He completed B.A., LL.B. from BMS College of Law, Bangalore in 2016.

Rashmitha Venkatachalam Das - POSH Specialist & Advocate

Rashmitha Venkatachalam Das is an advocate with more than 15 years’ varied experience including both law firm and in-house roles. As an expert on BCP Associates’ POSH team, she specialises in providing a broad range of services under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”). Currently, Rashmitha is the External Member of the Internal Committee of multiple organizations across sectors and has deep expertise in handling POSH inquiries. She also supports these organisations on a regular basis with queries related to sexual harassment, including drafting and reviewing POSH policies and assisting in setting up Internal Committees.

Rashmitha is also a seasoned POSH trainer, having delivered a multitude of specialised sessions for Managers and Senior Management, Employee General Awareness sessions, and focused training for Internal Committee members. In addition to English, she is fluent in Hindi and Kannada, ensuring meaningful training sessions and effective inquiries.

Having started her career at law firm of Krishnamurthy and Co, Rashmitha moved to in-house roles with Biocon Limited, Columbia Asia Hospitals Private Limited and Adecco India Private Limited. 

Rashmitha holds an LL.M. in Labour and Employment Laws from University Law College, Bangalore, graduating in the year 2018 with Two Gold Medals. She is also a Rank Holder at the University. She obtained her BA, LL.B. degree from Bangalore Institute of Legal Studies, Bangalore University in 2009. Rashmitha is registered with the Karnataka Bar Council since 2009 and is also a member of the Gender Sensitivity Sub Committee of Karnataka Employer Association (KEA), an industry association of employers with over 700 members.

Manisha Vidyadhar – Senior Associate

At BCP Associates, Manisha Vidyadhar is involved in managing and conducting labour law compliance audits of principal employer and contractors. She is also involved in client co-ordination and conducting labour law training programs for vendors. She has conducted on-ground labour law audit for factories. Manisha also provides support in advising vendor clients on labour law queries.  She completed B.A., LL.B. from BMS College of Law, Bangalore in 2016.

Amrutha Ananth – Principal Associate

At BCP Associates, Amrutha is a part of the Legal Advisory practice, Legal Audit practice and Labour Code Alignment Programme (LCAP). Amrutha specialises in Labour and Employment Laws and compliance having advised some of India’s leading companies for some of their most complex labour law matters.

Amrutha has more than seven years of experience in labour and employment law and has conducted several audits for both, principal employer and contractor for various leading IT/ITES companies, manufacturing sectors like pharma, automobile, construction and start-ups.

She is actively involved in drafting and reviewing employment contracts, HR policies, Employee Handbook, show cause notice, etc. for various organizations spread across diverse sectors. As a part of the Labour Code Alignment Program, she assists companies in review and alignment of their existing wage and employment policy with the provisions of the Labour Codes.

Sunil Arya – Principle Associate

At BCP Associates, Sunil Arya is part of the labour and employment law advisory and HR Policy practice and is actively involved in drafting and reviewing of employment contracts, opinions, HR policies, employee handbook, show cause notice, etc. for various clients spread across diverse sectors. He conducts training on labour and employment laws. Sunil is also involved in labour law compliance audits of principal employer and contractors and has conducted on-ground labour law audit for factories. In addition, he is engaged in knowledge creation and management of the firm and keenly writes on developments in labour and employment laws.

Prior to joining BCP Associates, Sunil has 10 years of post-qualification experience in diversified portfolios of advisory, drafting, policy analysis and dispute in the domains of contracts, general civil matters, employment law, competition law and construction arbitration matters. Sunil started his career as a Law Researcher in Delhi High Court. He moved on to be part of regulatory analysis team of CIRC, a unit of CUTS International. In addition, Sunil has been part of legal team of Jindal India Thermal Power Limited. He has also taught competition law, tax law and investment law at VIPS, Delhi.

Sunil holds LL.M. from The Indian Law Institute, Delhi. He is First Rank Holder in his thesis. He completed B.A, L.L.B. (Hons.) from I.P. University, Delhi. He also holds First Rank in P.G. Diploma in Competition Policy and Laws from The National Law University, Delhi.

Chandrakala K A – Principle Associate

At BCP Associates, Chandrakala has 12+ years of experience in conducting and managing labour law compliance audits of principal employer and contractors. She is also involved in co-ordination with many clients. She has conducted on-ground labour law audit for factories. She also provides support in advising vendors on labour law queries. Chandrakala is actively involved in research and providing valuable inputs to the firm pertaining to updation in labour law audit function.

Chandrakala started her career in litigation in chamber of Sri. Ashok where she was involved in drafting, pleading and appearance before Karnataka High Courts and lower courts on the criminal side.

Chandrakala completed B.A in Arts from Kuvempu University, Shimoga in 2003 and LL.B. from Mangalore University in 2006.