How Should We Decide the Salary for Retaining a Recently Retired Employee? Urgent Advice Needed

Sir,

There is one employee in our organization who retired yesterday, and our company would like to retain him for a period of one year.

Kindly advise on the percentage of salary on which we can retain him. Is there a specific rule that our company follows for retaining an ex-employee for a specified period? I am particularly interested in understanding the basis of salary/retainership fee.

Your prompt response is greatly appreciated as this is urgent for me.

Thank you,
Rekha

Well advised by RPK.

There are no rules behind this. You may hire him on a retainer at the prevailing market rates or based on his last drawn salary and job criticalness.

Regards,

Amit Seth.

You can offer him an amount not less than his last take-home salary because he was worth it until his retirement, and he is a valuable resource. That's why the Management wants to keep him.

Hope I make sense.
Prashant

Hi Rekha,

Please pay him according to the market rate, but the amount should be consolidated.

Regards

An employee can be taken into retainer after retirement with the same pay, but there will be a difference in the benefits afforded to him as an employee and as a retainer. He can be continued with a new agreement or appointment letter by settling his dues F&F of his employment. As far as pay is concerned, a lump sum amount can be paid directly with no breakups in salary.

I think all have made it fairly clear that it has nothing to do with any percentage. It all depends upon the organization's discretion based on the salary last drawn, market standard, criticality of the job, and the efficiency of the person.

Rekha, please share with us if you have another view regarding this matter.

Regards,

Thanks to all of you. Even I am also of the same belief. But since the question arose by my management team, thus wanted to take the experienced opinions of all of you.

Thanks,
Rekha

Dear All,

Does retainer consultancy attract any tax regarding taxation? If yes, what percentage? I have also heard that if the income exceeds a certain amount, the retainer is also subject to service tax, if I am not mistaken.

Thanks,
Trushit Acharya

Yes, retainers need to be deducted with TDS (Tax Deduction at Source), which I think is in tune with 10-12% of the total retainership fee.

Retainer, from a finance and accounts angle, is like a vendor to your company. He needs to submit the bill, and the company needs to pay him the fee.

Regards,

Amit

The present TDS deducted on retainers is 10.3%. As rightly written by Amit, he has to submit a bill for his services provided for the specified period.