Chapter XIV - Human Resource Management

Read the information below in 15+ languages by selecting your preferred language using the translation tool in the top left corner of the screen.

Made publicly available in the spirit of open access by its author, Noshir Dadrawala (CEO, Centre for Advancement of Philanthropy), and collaborators CAP and Forbes Marshall.

Successful NPOs share three characteristics:

The NPO's Human Resource helps to propel this transformation by facilitating positive change. However, much as focusing on programme goals and objectives is important, it is equally important to focus on recruiting, building capacity, and looking after the wellbeing of employees and volunteers. A happy employee or volunteer experience means better output and outcome. A happy employee or volunteer is key to organisational and programmatic success. As a rule of thumb, happy employees and volunteers also make all stakeholders happy. There is a wise adage: 'Charity begins at home.' There is no point making beneficiaries or donors happy at the cost of making those working for the beneficiaries unhappy. In other words, do not be uncharitable to your employees or volunteers. Look after them and they will look after the organisation, the donor's interest, and the interest of the end beneficiaries with greater responsibility and enthusiasm.

Employee compensation is one of the most important areas that is often overlooked by the board of an NPO. With limited budgets, nonprofit boards need to take a flexible total rewards approach to compensation. This includes both direct compensation like sector competitive salaries and indirect compensation benefits, such as recognition and awards, and the quality of the NPO's culture. This type of compensation strategy can play a major role in boosting the organisation's ability to attract, engage, retain, and develop key talent and team members.

Laws to protect employees

India has a sophisticated and adaptable legal framework for employment that protects both employers' and employees' rights. The basis of just and equitable work practices is created by these laws, which range from the fundamental values safeguarded by The Employment Act of India to the intricate regulations controlling employment periods, personnel classifications, and statutory benefits. Following these legal requirements not only promotes a positive work atmosphere but also reduces the likelihood of legal issues and associated fines. NPOs should protect themselves and their employees' well-being by thoroughly comprehending the intricacies of Indian labour regulations and scrupulously following them. A proactive approach to compliance is crucial, whether it is negotiating the complexities of employee classifications, guaranteeing statutory benefits, or settling disputes through the appropriate channels.

NPOs not exempt under most labour laws

Many NPOs tend to think and even believe that being established for charitable purpose automatically exempts them from the application of various labour laws in India. This is incorrect. Almost every labour law that is applicable to for-profit organisations is also applicable to non-profit organisations regardless whether registered as a public charitable trust, a society, or a Section 8 company. The rights of both employers and employees are safeguarded by various employment laws, which make them crucial. They guarantee that workers uphold their agreements with the organisation and are not exposed to harassment or discrimination at work. When an employee or for that matter even when a volunteer is appointed, it is essential for both parties to sign the appointment letter which is like an employment or volunteer contract with clear terms and conditions in terms of specific job description, work hours, leave, compensation, social security benefits (if applicable) and terms of termination on either side.

Employee or consultant

Many NPOs, to avoid compliance under social security legislations like Employees' Provident Fund and Payment of Gratuity, tend to appoint consultants who they think would not be considered under law or by regulators as employees. The following would be indicative that the person hired is an employee disguised as professional consultant:

A consultant is one who is not in the exclusive service of one fixed client (organisation). A genuine consultant would be a person offering his/ her professional services to multiple organisations. A consultant working continuously for several years without a break with just one organisation could be considered under law as deemed employee. While TDS (Tax Deduction at Source) of regular employees would be deducted under section 192 (salaries) of the Income Tax Act, compensation paid to consultants would be deducted under section 194J (professional services) and not under salaries.

NPOs also hire people on 'fixed term contract' for specific projects on condition that the contract would stand terminated at the end of the project which generally would be for a period of three years. In such a contract, it would be important to specify that the person appointed on the fixed term contract would not enjoy the benefits and privileges due to those appointed as regular staff on salary. The person should sign the contract (project related appointment letter) in acceptance.

Human Resource Policy

Human resource management is a strategic approach to effective and efficient management of people in any organisation. It should be designed to maximise employee and volunteer performance in the service of the organisation's strategic objectives. It is therefore desirable for every NPO to have a clear and written HR Policy which must be reviewed periodically and available to all employees, consultants, and volunteers.

The following would be policy essentials

Hiring foreigners

When appointing foreigners as employees or volunteers the following is crucial:

Leave

It is the right of every employee to enjoy leave and the accepted norm is to allow 'casual leave' (this includes sick leave) of seven to eight days in a year. If the employee does not avail this leave during the year, it automatically lapses. Privilege leave is usually for ten to twelve days and most organisations encourage employees to avail this leave and discourage or even disallow encashment of this leave. Maternity leave is as per Maternity Benefit Act for a period of twenty-six weeks. Public and festive holidays are granted as per national and state rules.