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Dear Friends/Seniors

Following are the some queries which required your expert view/openion.

1.Is there any specification on the type of person can be hired on Contract?

2.Whether we can hire a Consultant on contract?

a.Upto what period hiring can be made on contract on our payroll?

b.If contract is getting extended after every prescribed period, then whether consultant’s tenure would result in employment?

i.If so, then the employment would be considered effective from which date i.e., from the start date of contract or is it applicable from any specific date e.g., after expiry of specified period which consider it is regular employment.

c.Whether Gratuity is applicable on Contract employees as well, if the tenure is extended for 5 years or beyond?

3.While a consultant is hired on Contract then whether he / she is to be covered under Provident Fund?

4.If not to be covered under then what formalities are required to be completed at our end so that we comply with norms?

5.If a person hired on contract was covered under PF in previous employment then whether it is mandatory to cover him/her in PF?

6.Normally, we hire resources on contract for need based project wherein duration of project is known in the beginning and it gets extended based on requirements?

7.We issue a separate letter of Contract to employees, which is termed as “Service Agreement” stating all conditions of association in that – whether there is any standard terms of contract or service agreement, which we have to use?

8.In case of any break is required before continuing the contract then what are the formalities?

9.We allocate

a.a separate resource code to employees hired on contract.

b.Official e-Mail id is given <…………[email protected]>

c.Access rights for our shared portal for time sheet and leave

10.Payment is made based on Invoice raised by employee subject to TDS, ESI, etc. – is it the correct way?

11.We allow them 1 day leave (Common Leave) per month while they are on Contract.

12.Whether any Leave Encashment is to be made to them after their contract is over – although they are not entitled for Earned Leave as per terms.

13.In case, an individual claims that he was an employee since he/she got associated with company on Contract Mode

14.Whether # of hours of work / # of days worked in a month is important to determine whether the individual is to be considered as an employee or Contractual staff

15.Contract staff is availing all other benefits e.g., Company’s weekly off; Holidays; Get Togethers; Reimbursement of expenses, Visiting Cards (in specific cases only); if any;

16.Renewal of contract is based on inputs received from concerned Manager – whether contract to be renewed or not

17.At times, we have to hire a person at Senior Level (e.g., Delivery Manager having 20+ years of experience) to avail his/her services for one of the Business Units – whether contract can be for longer duration (e.g., 1 year / 2 year / 3 year / 4 year etc.) and when the individual is attending office regularly.

18.Formalities to be completed while an individual is hired on Contract

19.We are also deducted ESI for individual hired on Contract in case his/her Contract amount is less than Rs.15,000/= p.m.

Regards!!...Prakash Tiwari

From India, Delhi
Dear Prakash,

Please find the answers on queries raised by you.

- It completely depends on the skill sets of the person if their skill sets matches your requirement and they are open for contractual employment you can hire them.

- Surely you can hire consultants on contracts however their fees will be little higher.

- No any consultant or employees who are on contract they are not eligible for PF, ESIC

- Only TDS has to be deducted if the amount is taxable.

- In the service agreement you have to clearly mention the expectation of work, compensation, Tenure, Work timings, you have to mention before how many days you will inform the employee about the extension of contract, since you are giving one leave every month you can mention that also, mention that they are not allowed to share any confidential details and so on

- Since they are part of your system they can use your official email id.

- yes they can issue you the invoice and you can do the needful TDS has to be deducted in case the amount is taxable.

- Leaves encashment some companies do some do not so it is your company call

- Any employee who is working on contract they have to follow all the rules and regulations of your company be it dress code, working hours, break hours, working days, holidays and so on

- You can allow them weekly offs, holidays and also you can invite them in get together's please understand that they are also human beings what will they do coming to office on weekly offs or holiday when no one is working.

- Renewal of contract is depends on employees skill sets, attitude and companies need of the employees.

- you have to have their all the documents and also contact details

- As I mentioned contractual employees are not covered under ESIC.

Hope it helps!!!

From India, Pune
All employments are contracts. To answer your queries, we need to examine the difference between the terms Contract of Service and Contract for Service.

Contract of Service

All employments are contract of service. Under the contract of service, there are certain tests

1. The employee is controlled and supervised by a Manager/Supervisor of the Organisation

2. The employee is expected to work operate at specified hours and at specified location.

3. Presence of the employee is mandatory and he or she cannot be substituted by another person on his own accord to perform his/her work.

4. Employees have all statutory rights including Social security coverage, Holiday etc.

5. Employees also enjoy other welfare measures offered by the Management

6. There must be” mutuality of obligation” between the parties. The Employer is obliged to provide work and the Employee is obliged complete the work, within the scope of job description.

7. The Employer has a right to take action if the employee fails to fulfill their obligation. If the Employer does not fulfill their obligation, then the employee can raise disputes.

Now let us examine the term Contract for Service

1. Contractors have a contract for services with their client.

2. A contract for service is a strictly business to business contract between two firms. The firm could be a proprietorship firm where a single individual is involved.

3. There is no question employment involved.

4. Obligations of the Contractor will include supply of service as per specifications; complete the requirement of the client according to the schedule and standard and the requirement to make right the errors without any additional remuneration.

5. Rights of the Contractor shall include the right for the payment as per the contract and the payment at the stipulated time. The contractor also has a right to complete the work with any substitute the Principal has no control over the Contractor’s employees.

Let me give one easy example.

A recruiter employed on contract of Service completes the requirement on time. However, the candidate joined resigns within two months/three months. The Recruiters salary is not stopped or no recovery is made from the Recruiter.

However, an Organisation has “contract for service” with a Placement Agency and if the candidate so selected resigns within two months/three months, then it is obligatory on the part of the Placement agency to provide another candidate at their cost and no fee will be levied for this purpose.

For the queries you have raised, it sounds like a Contract of Service.

Contract of service could be temporary, permanent or for fixed term. For example an employee can be on a contract of service for Two years and at the end of two years, his term expires. But this employee is eligible for all statutory benefits if his remuneration is within the limit specified in the legislations.

If the contract of service exceeds 5 years, then the person is eligible to receive gratuity.

However, Industrial Disputes Act provided relief for fixed term employments. A worker engaged for a fixed term is not eligible to receive retrenchment compensation at the end of the fixed term.

I trust this clarifies your doubts to some extent.

From India, Chennai
There was a mention in one of the responses that Contractual employees are not covered under ESI.
This is not correct and I hope all my friends in this forum will agree to this. If an employee is engaged on contract of service, as I stated earlier, he is a direct employee and he or she is covered. If there is a contract for service with an agency and the agency's employee performs the work, then it is the responsibility of the Principal Employer to ensure that he or she is covered under ESI. Of course this is subject to their drawing lesser than the salary limit fixed under ESI Act

From India, Chennai
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