Dear All,
Please let me know if we can hire an employee on a regular grade for a fixed period. I have a case where the person is above 60 years old, and we wanted to hire him on a contract. However, he is denying it, stating that his tax deductions will be high (10% TDS) and he has to register himself for Service Tax if his income crosses Rs.10 LPA.
We still want to hire the person, so how can he be managed in regular employment with a fixed term? Our company policy for contract labor and regular employees is the same; only PF, Gratuity, and superannuation benefits are not available to contract employees.
Please let me know how this can be managed across the industry.
From India, Pune
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3Please let me know if we can hire an employee on a regular grade for a fixed period. I have a case where the person is above 60 years old, and we wanted to hire him on a contract. However, he is denying it, stating that his tax deductions will be high (10% TDS) and he has to register himself for Service Tax if his income crosses Rs.10 LPA.
We still want to hire the person, so how can he be managed in regular employment with a fixed term? Our company policy for contract labor and regular employees is the same; only PF, Gratuity, and superannuation benefits are not available to contract employees.
Please let me know how this can be managed across the industry.
From India, Pune
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You can appoint employees for a fixed period. Such contracts of employment are generally referred to as Fixed Term Contracts (FTC), under which the employee will be serving only for the fixed period, upon the expiry of which the employment will be terminated automatically. The Industrial Disputes Act also recognizes this kind of employment. Since this is purely an employment contract, everything will be like a regular employee, but the only difference is with regard to termination, which will happen automatically at the end of the period for which the employment is given.
In the FTC kind of engagement, which is often given to persons with proven skills and whose services would be required only for a fixed period of time, the TDS will be deducted as if he is a regular employee and is under the head "salaries" and not u/s 194J. There is no need for service tax registration on the part of the person engaged because he is giving his labor and not any professional "service."
There can be different service conditions for different categories of employees. Similarly, there can be different treatment for these FTC employees regarding service conditions. However, these employees are also covered by ESI, EPF, Bonus, and Gratuity laws. Therefore, if an FTC employee's salary is less than 15,000, he should be paid ESI and PF. If it is 21,000 or less, naturally, he will also come under the Bonus Act. Additionally, if he serves the company for 5 years, he should be paid Gratuity once he decides to leave the company.
Normally, an experienced person who is above 60 years will not be available with a salary of only 15,000 or even 21,000. This will exclude ESI, EPF, and the Bonus Act. If his service is not required for such a long duration, you can restrict his employment for 4 years (and a few months if required) and avoid the payment of gratuity. I have purposely not mentioned a service less than 5 years and quoted 4 years as ideal for FTC just because there might be comments from different corners that 4 years and 240 days will qualify for gratuity, and the entire discussion may get deviated with Madras High Court or Kerala High Court verdicts, etc., and our main objective of the thread may get vitiated.
Madhu.T.K
From India, Kannur
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In the FTC kind of engagement, which is often given to persons with proven skills and whose services would be required only for a fixed period of time, the TDS will be deducted as if he is a regular employee and is under the head "salaries" and not u/s 194J. There is no need for service tax registration on the part of the person engaged because he is giving his labor and not any professional "service."
There can be different service conditions for different categories of employees. Similarly, there can be different treatment for these FTC employees regarding service conditions. However, these employees are also covered by ESI, EPF, Bonus, and Gratuity laws. Therefore, if an FTC employee's salary is less than 15,000, he should be paid ESI and PF. If it is 21,000 or less, naturally, he will also come under the Bonus Act. Additionally, if he serves the company for 5 years, he should be paid Gratuity once he decides to leave the company.
Normally, an experienced person who is above 60 years will not be available with a salary of only 15,000 or even 21,000. This will exclude ESI, EPF, and the Bonus Act. If his service is not required for such a long duration, you can restrict his employment for 4 years (and a few months if required) and avoid the payment of gratuity. I have purposely not mentioned a service less than 5 years and quoted 4 years as ideal for FTC just because there might be comments from different corners that 4 years and 240 days will qualify for gratuity, and the entire discussion may get deviated with Madras High Court or Kerala High Court verdicts, etc., and our main objective of the thread may get vitiated.
Madhu.T.K
From India, Kannur
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Dear Sir,
1) As per the law, is there an age for retirement or is it up to the company policy?
2) If the retirement age according to the law is 60 years, can we appoint a Fixed Term Contract (FTC) employee earning below Rs. 15,000 and offer them a regular salary with basic pay, Dearness Allowance (DA), etc.? Will they then be eligible for Employees' State Insurance Corporation (ESIC) and Provident Fund (PF)?
Thank you.
From India, Mumbai
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1) As per the law, is there an age for retirement or is it up to the company policy?
2) If the retirement age according to the law is 60 years, can we appoint a Fixed Term Contract (FTC) employee earning below Rs. 15,000 and offer them a regular salary with basic pay, Dearness Allowance (DA), etc.? Will they then be eligible for Employees' State Insurance Corporation (ESIC) and Provident Fund (PF)?
Thank you.
From India, Mumbai
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You can employ people on FTC even at low wages but within the salary as per Minimum Wages Act. There is no law which specifies the retirement age of people in private companies. If the certified Standing Orders have set a restriction regarding the retirement age, you cannot hire people beyond that age. If the employer is agreeable to payments such as ESI, PF, Bonus, etc., you can proceed with that.
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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Dear Gokul,
The retirement age is 60 years or the age at which the employee agrees to retire as per the Industrial Employment Standing Order Act. There is no relation between the employee's age and their salary. Therefore, you can appoint a person with a monthly wage of 15000, which is the normal rate of your minimum wages followed by all other labor laws such as ESI, PF, Bonus, etc.
Thank you.
From India, Pune
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The retirement age is 60 years or the age at which the employee agrees to retire as per the Industrial Employment Standing Order Act. There is no relation between the employee's age and their salary. Therefore, you can appoint a person with a monthly wage of 15000, which is the normal rate of your minimum wages followed by all other labor laws such as ESI, PF, Bonus, etc.
Thank you.
From India, Pune
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Dear Madhu,
For the fixed-term contract employees, the leave policy should also be similar to that of other indefinite-term employees, and they should also have benefits like leave encashment or carry forward like other employees. In short, all benefits should be extended to them.
Thank you.
From India, Pune
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For the fixed-term contract employees, the leave policy should also be similar to that of other indefinite-term employees, and they should also have benefits like leave encashment or carry forward like other employees. In short, all benefits should be extended to them.
Thank you.
From India, Pune
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I download the store's register in Excel format prepared by Mr. Siddarth Singh. It is password-protected. How can I make my entries? Could you please explain to me? It will be very helpful for me.
With regards,
Haridas
From Kuwait, Kuwait City
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With regards,
Haridas
From Kuwait, Kuwait City
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If somebody is appointed as a consultant, then only 10.5% TDS and Service Tax (if income crosses Rs 10 LPA) are applicable. He can be appointed as a contract employee for a fixed period to avoid all these issues.
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A consultant should be a consultant by all means. He should be a professional from whom the other senior employees take advice. He will not have fixed working hours, nor will there be any restrictions as to working for other organizations. I remember one case (Workhrad Hospital Vs. Income Tax) in which the doctors were given the title of professionals but were not permitted to take on private practices. Instead, they were required to follow the timings of the hospital, and their remunerations were subjected to income tax deductions as if they were professional charges. The court held that an employer-employee relationship existed, and the remuneration should be treated as salary. The TDS should be deducted following section 192 of the Income Tax Act and not as per section 194J.
It is very common for even unskilled workers to be given extensions of service. In order to avoid ESI and other statutory payments as per labor laws, they are often given a fancy designation like consultants. Even public sector undertakings (PSUs) engage in this practice. For example, All India Radio hires people for data entry work as "professionals" and deducts taxes on the meager sums being paid to them. These individuals then file returns and reclaim the money. Interestingly, they end up paying more than what they receive as a refund to the person filing the returns. This highlights the knowledge base of these data entry workers. What professional advice can one expect from these individuals?
Madhu.T.K
From India, Kannur
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It is very common for even unskilled workers to be given extensions of service. In order to avoid ESI and other statutory payments as per labor laws, they are often given a fancy designation like consultants. Even public sector undertakings (PSUs) engage in this practice. For example, All India Radio hires people for data entry work as "professionals" and deducts taxes on the meager sums being paid to them. These individuals then file returns and reclaim the money. Interestingly, they end up paying more than what they receive as a refund to the person filing the returns. This highlights the knowledge base of these data entry workers. What professional advice can one expect from these individuals?
Madhu.T.K
From India, Kannur
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