Payroll for NGOs and trusts

Salaries charged to projects

Tag each employee to the project that funds the post using a cost centre, and record any split, such as 60 percent to a CSR grant and 40 percent to an education project, in a simple allocation sheet kept by finance. When a person works across two grants, keep time records or a signed allocation that matches the split, because donors and auditors will ask. Payroll produces the salary cost per person; finance applies the allocation to charge each grant and prepares the utilisation certificate.

Consolidated pay and the 50 percent wage rule

Many NGOs pay a consolidated monthly amount, especially on project posts. Under the Code on Wages, basic pay plus dearness allowance must be at least half of total remuneration, and allowances above that line are added back to wages, raising the PF and gratuity base; see the wage definition. If a field coordinator's ₹30,000 is split as ₹10,000 basic and ₹20,000 allowances, ₹5,000 of the allowances counts as wages too, making ₹15,000 the base. Budget the employer's cost on that base when writing the grant.

PF, ESI and professional tax on project staff

Fixed-term project staff hold full employee status, so they are covered for PF and ESI on the same basis as permanent staff, and professional tax applies in states that levy it. Check the PF and ESI rules for your establishment and budget employer contributions in every grant. Consultants paid a fee outside an employment relationship are paid through accounts, not payroll. Decide carefully who is which, because the label on a contract does not change the reality of the work.

Month-end steps when tranches are late

Collect inputs by the 1st: travel reimbursements approved by the programme manager, arrears after a grant-linked revision, advance recoveries and any leave encashment. Attendance closes by the 3rd, finance checks the draft by the 5th, and salaries go out by the 7th. If a donor tranche is late, wages are still due by the 7th of the following month, so keep a reserve or bridge from core funds, and record the transfer between projects for adjustment when the tranche arrives.

How to set it up in ZeniaHR

1. Add every funded project to the cost centre master in Organization, and assign each employee's cost centre in their organization assignment.
2. Split each consolidated salary in Direct Payroll into Basic, DA, HRA and Special using company percentages, with Basic and DA together at least half of gross.
3. Add monthly payroll inputs such as travel reimbursements, arrears after grant-linked revisions and advance recovery.
4. Run payroll from the finalized attendance month, so paid days stay within each fixed-term employee's joining and exit dates.
5. Finalize the run, share payslip PDFs, and use the payroll, PF and ESI reports in Reports for grant audits and utilisation certificates.
6. Move payment batches from draft to approved to paid by the 7th, even when a tranche is delayed.

Read more about payroll in ZeniaHR.

Roles this applies to

Frequently asked questions