Dear Sir, We have a small-scale rubber industry in Ambad Nashik. Our company has an HR policy & retirement age is 60 years. But our management will continue the service of our employees after retirement. As an HR, I have a question: What are the disadvantages and risks for the company if there is any mishap on company premises? Can we make any retainer ship agreement after retirement retaining employees/workers? Please guide me on the above issue, and please suggest best practices followed by the company.

Altaf Sayyed
HR Manager

From India
Dinesh Divekar

Dear Altaf Sayyed,

The employees are retained to work after retirement. This is nothing new. However, retired employees work as consultants and are paid a retainership fee. This relationship is out of the purview of the employer-employee relationship and the labour laws are not applicable.

Nevertheless, in a few companies, they continue to be normal employees. The discussion on their PF and ESI deduction took place earlier. Check the relevant threads.

Your question is about the risks involved in employing retired employees. This is especially about the mishap that may happen by chance. But then the retired employees are sufficiently senior and generally they are given office jobs. They may visit the shop floor but they may not directly work on the shop floor. if you perceive risk because of their work, then better to take their insurance.

Now let us come to risk assessment from the management science point of view. If your company continues to rely on the old employees, then this shows the failure of the replacement planning. Retirement of the employees does not happen suddenly. It is a foregone conclusion. Despite this, why was their successor not groomed? Another revelation of your query is the reliance on the persons rather than processes. Dependence on the people rather than processes is the biggest risk. Even now, your company needs to identify the successors and groom them.

Post-retirement placement may have one more side effect too. Such people may develop a bloated sense of self-worth and may start boasting about how they are indispensable. As such they are senior citizens. Countering their argument even if irrational is difficult. Against this backdrop, if they start throwing their weight, it could generate undercurrents of vexation among other employees.

I hope I have given sufficient pros and cons of employing the retired persons.


Dinesh Divekar

From India, Bangalore

Employing Retired person after retirement as retainer / consultant/ adviser is only possible if those people are very few in numbers and their nature of job should not be like daily routine employee. They are usually not reporting for duty on regular basis and engaged in certain specialized jobs. In this case 10% TDS will be deducted and they will not be eligible for PF, ESI, Gratuity Bonus etc. As a precaution they should be covered under Employee Compensation Act in case of any Accident or death.

I have one client who had a practice of engaging retired employee as retainer and working like other daily employees. TDS deducted and payment was made. One of such employee claim for gratuity after 7 / 8 years of post retirement service. The case was referred to Labor Directorate where DLC very categorically said that all those employees are not retainer and they are eligible for PF, ESI, Gratuity, Bonus ETC. as applicable. The logic behind this was they are as good as normal employee and not doing any specialized job like a real retainer / consultant / Adviser etc. Even DLC opined then what is wrong of engaging all employees as retainer etc, instead of normal employee - which is not accepting in laws.

Therefore, engaging huge number of retiring employees as retainer etc. and deducting TDS will not be a wise proposition, rather it will be better to re-engage them as employee.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

From India, New Delhi

A retainer is not an employee who will come to your office regularly and spend the regular time in the office. A retainer will not follow the leave rules of the organisation and take approval for remaining absent from work. If your purpose of keeping a retired person is to work like a regular employee, awarding retainership is not a possible option but you should give him employment contract only. You can appoint him under a fixed term contract. But if his salary is below Rs 21000, he should be given ESI coverage. If he has started getting pension or is a PF Pensioner, he can be excluded from the EPF.
From India, Kannur
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