Query On Contractual Employment

Hi All,
Hope you are doing fine.I have a query regarding contractual employement.
For positions like customer support/front office executives etc my
company is looking at possibility of a contractual employment of 6/11
months.
Now my concern is the legalities of such employment.Are such
contracts valid in India. Are these people entitled for PF, etc.How would it
actually be beneficial for the organization.
Hope to get a reply from my group mates.
Regards,
Karuna Ahuja

Hi Karuna,
Contract Staffing is very much valid in India and is a hot business today. The law says that a person should not be on contract for more than 90 days. So the contract agreement is made for 90 days and renewed every 90 days. Such people will not be eligible of PF or any statutory obligations. They would be paid a consultancy fees and not salary. The fees would attract a TDS [i think it is 5.2%]. They would not be eligible for any benefits from the company.
The company would benefit in terms of Cost Cutting, Lay offs, Head Count for a particular dept.
Let me know if i have answered your query.
Regards,
Soumya Shankar

Hi Soumya,
Thanks for the reply. it would be great if you can help me on the following details too.
1. What if we take these employees for 11 months/2 years with a consolidated amount above Rs. 7,500/-(wherein the PF, ESI is not essential).
2.Also what about the norms related to removal of such employees. Is there some binding that there should be an approval from the government..etc.
3.What are the laws that my company should take into consideration while going in for such contracts.We are a company under the Shops & Establishment act.
Thanks & Regards,
Karuna Ahuja

hi karuna..
Am replying quite late to the message, but hope that it may be beneficial to you..

• 1. You can hire a staff under apprentice act for the said period. The payment is stipend and so you need not pay any PF on it..
  2. You need to consult with your Labour Officer for this purpose, [if you are currently employing over 20 staffs on your payroll]

Second option is

• 1. Hire a manpower consultancy for the said positions. They will provide the manpower. You make the payments to the consultancy and consultancy pays to the employees in turn. Normally the consultancy charges somewhere in the range of 5% to 10% [plus Service Tax] over and above the salary payments. But it is worth it, if you want to avoid any kind of problems in future, as at no point of time the employees are directly related to you. [officially they are the employees of the consultancy firm]

In my opinion this as mis utilization of law. as per law, if the employee engaged in employment is beyond 6 months, his service is required to be confirmed and he is entitled for all benefits. it is unfortunate that most of the companies in india are mismutilizing the law for the sake of cost cutting.