Please be informed that we are using more freelancers which is 40% of permanent staff in our company. My management has requested to give solution not to pay PF and ESI for these freelancers.
Please anyone let me give answer, without PF and ESI deductions, salary should be paid to freelancers and the same to be accountable (record).
Deepa
HR
From Kuwait
2Please anyone let me give answer, without PF and ESI deductions, salary should be paid to freelancers and the same to be accountable (record).
Deepa
HR
From Kuwait
Freelancers are mostly not employees.
In most cases, they are independent contractors. Being independent contractors, they will not get a salary but will raise an invoice for their work and will be paid for the invoice. So naturally pf and esic do not apply.however, you will be required to deduct tds (income tax) from all payment exceeding ₹ 30000 per year.
Ensure that separate contracts are entered with each freelancer and PO / work orders are issued. Attendance records should not be kept and they should not be working similar to employees. They should have the freedom in terms of their coming to work and from active supervision.
From India, Mumbai
In most cases, they are independent contractors. Being independent contractors, they will not get a salary but will raise an invoice for their work and will be paid for the invoice. So naturally pf and esic do not apply.however, you will be required to deduct tds (income tax) from all payment exceeding ₹ 30000 per year.
Ensure that separate contracts are entered with each freelancer and PO / work orders are issued. Attendance records should not be kept and they should not be working similar to employees. They should have the freedom in terms of their coming to work and from active supervision.
From India, Mumbai
]Thanks Banerjee. Still I need more clarifications on Freelancers concept. How define Freelancers VS permanent employees. Because my company is attached with one of the american company. They need to include the freelancers with payroll. Whether PF & ESI can deduct? or Is there any solution for avoid PF & ESI deduction.
Deepa
HR
From Kuwait
Deepa
HR
From Kuwait
Freelancers are those who are not permanent employees of the company. They would be working for a fixed period, some times for a part of the day / week and are free to work for other organisations or do their own business.
In many cases, for tax and labour law purposes, some persons are shown as freelancers though they are not doing work for anyone else or are doing full time work at the premises. Some lawyers working for companies opt for freelance / retainer pattern on paper to that they do not have to give up their membership of the bar council.
Attaching freelancers to a payroll sheet creates a problem in Indian scenario. However, in cases you described above, it is not a serious matter as they are actually Fixed Term Employees not freelancers.
The distinction i was making was more on the Consultant v/s employee pattern where the person gives a bill for his services and does not draw a salary. He is paid as professional fees.
From India, Mumbai
In many cases, for tax and labour law purposes, some persons are shown as freelancers though they are not doing work for anyone else or are doing full time work at the premises. Some lawyers working for companies opt for freelance / retainer pattern on paper to that they do not have to give up their membership of the bar council.
Attaching freelancers to a payroll sheet creates a problem in Indian scenario. However, in cases you described above, it is not a serious matter as they are actually Fixed Term Employees not freelancers.
The distinction i was making was more on the Consultant v/s employee pattern where the person gives a bill for his services and does not draw a salary. He is paid as professional fees.
From India, Mumbai
Thanks, I got you valuable points. I understand that we should not show the freelancers in main payroll. If we show them, then we have to deduct PF & ESI or TDS. I will discussion to my management regarding the subject matter. Thanks for your valuable replies.
Deepa
From Kuwait
Deepa
From Kuwait
If you show freelancers in the main payroll, they will be eligible for all benefits, including pf, esic and paid annual leave. Tds on salary will be applicable in case their salary exceeds the taxable limit.
If you show them as independent contractors or professionals, then they will not be eligible for pf or esic. However, you will deduct tds from the invoices they raise of it exceeds ₹ 30000 per year. This tds will be at a flat 10% of invoice value.
From India, Mumbai
If you show them as independent contractors or professionals, then they will not be eligible for pf or esic. However, you will deduct tds from the invoices they raise of it exceeds ₹ 30000 per year. This tds will be at a flat 10% of invoice value.
From India, Mumbai
Try to understand Deepa two things
1. If your co. does not want burden of ESI and EPF liability, You can keep such posts on Professional /Freelancer base. But as already discussed herein before, you needs to maintain their record separately and not as employee. Further you needs to deduct 10% TDS from their payments. If their Professional fees {package} is more than 8 lakcs, everybody have to obtained Service Tax registration and you needs to pay them 12.36% additionally as service Tax. Further constitution of your organisation if "Co." then you needs to go in for "Reverse Method" under Service Tax.
2. Further the nature of work which is allotted to the concern so called Freelancers should be justifiable. Your organisation have to think in all angles and not only ESI & EPF. If you try to avoid / save here, you will loose some thing or legal complications under other acts.
There are another legal way outs, but after all it is depends on Case to Case basis. Forum have curtain limitations.
I suggest you to get clarified this issue more, from Proper Labour consultant and your C.A. Because the decisions like these are affecting on each other.
If you required any further assistance pl. contact us
Pramod Thakar
Pune
9822435423
From India, Pune
1. If your co. does not want burden of ESI and EPF liability, You can keep such posts on Professional /Freelancer base. But as already discussed herein before, you needs to maintain their record separately and not as employee. Further you needs to deduct 10% TDS from their payments. If their Professional fees {package} is more than 8 lakcs, everybody have to obtained Service Tax registration and you needs to pay them 12.36% additionally as service Tax. Further constitution of your organisation if "Co." then you needs to go in for "Reverse Method" under Service Tax.
2. Further the nature of work which is allotted to the concern so called Freelancers should be justifiable. Your organisation have to think in all angles and not only ESI & EPF. If you try to avoid / save here, you will loose some thing or legal complications under other acts.
There are another legal way outs, but after all it is depends on Case to Case basis. Forum have curtain limitations.
I suggest you to get clarified this issue more, from Proper Labour consultant and your C.A. Because the decisions like these are affecting on each other.
If you required any further assistance pl. contact us
Pramod Thakar
Pune
9822435423
From India, Pune
Hi Promod,
Thanks to suggestion. I would like to ask something "you have mentioned If "co" then needs to go in for "Revers Method" under service tax. Please explain more about "Revers Method" if you know.
Deepa
From Kuwait
Thanks to suggestion. I would like to ask something "you have mentioned If "co" then needs to go in for "Revers Method" under service tax. Please explain more about "Revers Method" if you know.
Deepa
From Kuwait
Pl. contact your CA or Service Tax consultant in this regard. I have tried to give you advice very clear about your queries. Regards, Pramod Thakar
From India, Pune
From India, Pune
Shashwat Ji,
Organization (for I am working as a freelancer) not agree with your reply about esi not applicable on freelancers. Finance department asking me please provide the section where it written. I humbly request, can you please let me know about it.
Regards,
Vinod Kumar Saini
From India, Gurgaon
Organization (for I am working as a freelancer) not agree with your reply about esi not applicable on freelancers. Finance department asking me please provide the section where it written. I humbly request, can you please let me know about it.
Regards,
Vinod Kumar Saini
From India, Gurgaon
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