Is there any statute or guideline which governs hiring of staff as consultants? We need to bring clerical staff for short-term project of 3 months. We do not want to create employer-employee relationship as the staff do not want to enrol under PF.
From India, Chennai
From India, Chennai
1
Hi Vivek, My opinion is as follows:-
As you do not want to establish employee-employer relationship, you can appoint them as consultants for a fixed term against a consolidated payment called Legal & Professional charges. You should pay them legal and professional charges against a bill for the professional services rendered during the month. In the absence of a PAN, tax deducted @ source (TDS) on such legal and professional service charges paid will be double, as per provisions of the Income Tax Act / Rules.
Regards
N Ramesh
From India, Mumbai
As you do not want to establish employee-employer relationship, you can appoint them as consultants for a fixed term against a consolidated payment called Legal & Professional charges. You should pay them legal and professional charges against a bill for the professional services rendered during the month. In the absence of a PAN, tax deducted @ source (TDS) on such legal and professional service charges paid will be double, as per provisions of the Income Tax Act / Rules.
Regards
N Ramesh
From India, Mumbai
You cannot appoint a clerk as a Consultant. Who is a consultant? A consultant is one who is consulted for some advises. Hee will not be working for you alone and his presence will nt be there in your office from Monday to Saturday, from 9 am to 6 pm.
As advised by many members here, if you employ a person as consultant and deduct 10% TDS from the "fees" paid to him, you will face charges from Income Tax, ESI, EPF and many other labour departments. The Income Tax authorities will only ask you what advice this clerk is giving you and on what basis he is attending your office regularly. In Vs Wockhardt Hospital Ltd Vs Department of Income Tax a similar question had arose. The Hospital was employing Doctors as Consultants and deducting TDS under section 194J treating them as professionals. The Income Tax authorities found that these Doctors have been regularly employed and all the HR related policies like leave rules, exclusiveness (not to work anywhere else) timing etc were applicable to them. It was found that these establish that they are not consultants but employees whose income should be subjected to deduction of income tax u/s 192 as if they are paid salaries.
In your case, the EPF and ESI authorities will also demand contributions subject to coverage conditions relating to salary. They may demand it after so many months and by the time, the clerk you had appointed should have left the company but you cannot escape from your liability, you should pay both the employee's contribution as well as your share of contribution.
Therefore, even if your work is not regular but for a short period, you should not compromise on legal compliances. Appoint one person under a fixed term contract for, say one year or six months, paying him ;salary' and deducting therefrom PF and ESI as applicable.
From India, Kannur
As advised by many members here, if you employ a person as consultant and deduct 10% TDS from the "fees" paid to him, you will face charges from Income Tax, ESI, EPF and many other labour departments. The Income Tax authorities will only ask you what advice this clerk is giving you and on what basis he is attending your office regularly. In Vs Wockhardt Hospital Ltd Vs Department of Income Tax a similar question had arose. The Hospital was employing Doctors as Consultants and deducting TDS under section 194J treating them as professionals. The Income Tax authorities found that these Doctors have been regularly employed and all the HR related policies like leave rules, exclusiveness (not to work anywhere else) timing etc were applicable to them. It was found that these establish that they are not consultants but employees whose income should be subjected to deduction of income tax u/s 192 as if they are paid salaries.
In your case, the EPF and ESI authorities will also demand contributions subject to coverage conditions relating to salary. They may demand it after so many months and by the time, the clerk you had appointed should have left the company but you cannot escape from your liability, you should pay both the employee's contribution as well as your share of contribution.
Therefore, even if your work is not regular but for a short period, you should not compromise on legal compliances. Appoint one person under a fixed term contract for, say one year or six months, paying him ;salary' and deducting therefrom PF and ESI as applicable.
From India, Kannur
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