Dear member,
Yes, it is a matter of worry. Nevertheless, from the business point of view keeping manpower on the contractor's roll is not that advisable.
The departments that function at the tertiary level like security or housekeeping do not play a major role in developing the products or providing services to the customer. Hence these are considered suitable for outsourcing. In contrast, the employees from the core department or the employees that are in the support function are directly or indirectly involved in the saistifying the customers. Hence it is not advisable to put these employees on the contractor's roll.
Let us do costing for keeping the employees on the contractor's roll. Imagine "X" number of employees are on the direct roll of the company. The company contemplates to put them on the contractor's rolls. What are the financial implications? These are as below:
a) Suppose monthly salary bill (including PF, ESI etc.) = Rs 10,00,000/-
b) Service charge by the contractor @ 10% = Rs 1,00,00/-
c) Total (a) + (b) = Rs 11,00,000/-
d) GST @ 18% on (c) = Rs 3,24,000/-
e) Total amount payable to the contractor = (c) + (d) = 14,24,000/-
Therefore, there is a whopping increase of Rs 4,24,000/- in the salary bill that works out to 42% increase! Which company can afford to do that?
In case one thinks that the 10% service charge by the contractor is too high and the contractor can provide service at 7% then also the amount payable to contractor works out to Rs 11,92,600/- which is 11.92% increase. Which company can afford to do that?
In fact, today we are passing through COVID-19 pandemic and reduction in backend costs is primary requirement of any businesspersons. Amidst this, if some businessperson thinks of putting the employees on a contractor's roll then it is nothing but "aa bail mujhe maar" (inviting trouble).
Thanks,
Dinesh Divekar