Hiring on Contract: Do We Need to Offer Full Benefits Like PF and ESI?

Dear Seniors,

I am in a dilemma in hiring a candidate for the front office & office assistant, who will be a direct employee but would be on a contractual basis. Let's say we hire an employee on a contract appointment valid for 1 year. Do we have to provide the employee with all benefits like PF, ESI, Gratuity, etc.?

Please let us know if any more points are left out. I would also request you to forward me a sample appointment letter on the same at [Login to view].

Looking forward to hearing from you!

Regards,

Jagdish

Dear Jagdish,

It doesn't make any difference whether you hire an employee directly or through some contractual terms; you have to comply with the statutory requirements like PF, ESI, Gratuity, etc.

Thank you.

Why not outsource this function to an outside agency and route it through a professional contractor? You can enter into a contract for one year, which can be renewed for subsequent years. However, if an employee completes 120 days of uninterrupted service, they can challenge the contract employment for the permanent nature of the job. The day you terminate the employee, they are legally protected and can be considered for regular employment in your company as per the Industrial Disputes Act and the Bombay Industrial Relations Act when a dispute is raised before the labor commissioner. Additionally, your contractor must obtain a license, and you have to register for certification of establishment under the Contract Labour Act.

The choice is yours.

Is it OK?

Regards,
Sawant

If a candidate has completed his services uninterrupted for more than 120 days, then it sounds good, as we are looking for reliable and potential candidates. However, if the candidate is good, we can always look forward to hiring him on our regular company rolls. Please advise us on the same.

Regards,
Jagdish

It requires no advice; you can go ahead as per the requirements of the company. However, keep the power of regularizing the potential candidate up to you; it should not be by default.

I think I have cleared myself.

I am outsourcing staff in a company and now I want to sign an agreement letter with my employee. The agreement should mention a 1-month prior notice requirement for leaving the job. Failure to provide the required notice will result in the company withholding the month's salary and other benefits.

Hi Kamal,

Simply mentioning in the agreement letter is not sufficient; you should also ensure full and final settlement on the due date.