Looks like your NPC is walking on the terrain and not your model of the ground. Does your model have any collision detection on? Is it a static model? Or Physics Off? For that model, I would make sure it was set to Static and Box Collision. Then pull the NPC up and see if he stands on it.
Intel i9-10900K 5.10GHz, 64 GB RAM, Nvidia GTX 1080 ti 11GB, Windows 10 64-bit, dual monitor display