Retaining a Senior Employee Post-Retirement: Legal Concerns and Consultant Options?

Hi All,

One of our employees is working as a Senior Production Officer, and he has reached retirement age. However, our management wants to retain him with the company.

My question is, how can we continue him in his current job? Are there potential legal issues? Could we hire him as a consultant?

Please provide detailed suggestions.

Regards,
Rajesh

Hi,

You can let me retire and then take him on as a consultant. Enter into an agreement with him listing his responsibilities and the fees to be paid for his services.

Dear,

It is not necessary to keep him as a consultant; you can extend his period even after retirement age. It will be better to give only one-year extension at a time.

You can continue to deduct his PF, but no amount will go to the pension, and both shares will be deposited in PF only.

Regards,
J. S. Malik

Hi Rajesh,

It depends on the management as to what type of employment they can offer to you as an employee. Another option is contractual basis employment. You can create a contract agreement between your employer and employee, and then the job can continue without any legal hurdles.

Regards,
Devendra

Dear Rajesh,

Please revise his terms of contract with an extension of one year and continue for the same work. In case he is healthy, you can extend further for another year and so on.

As prescribed by Mr. Malik, all PF amounts should be deposited to the EPF fund. Do not exclude him from the social security benefits, and he should get extra leave for taking care of his health. There should be no time constraints regarding visiting medical experts, etc.

There are many listed companies that take care of employees who have already crossed their retirement age.

Best Regards,
Sajid Ansari
Delhi

Well, it is the management's prerogative to grant an extension of service to a retiring employee based on the needs of the organization and the value-added performance of the employee.

The employee could be given standard retirement benefits, settling his account and closing legal benefits like PF/superannuation, etc., to maintain accurate records.

Offer him a suitable retention appointment on agreeable and respectable terms for a certain period, with a salary package and benefits, excluding benefits like PF/superannuation, etc.

Practical aspects, such as whether this will set a wrong precedent tempting others to expect such extensions, or negotiate extensions, force extensions by keeping assignments pending, etc., need to be carefully considered and handled as a special case.

Moreover, sending a signal that high performers are valued by the company beyond the normal terms of employment and are taken extra care of, is a positive signal promoting employee retention and reducing the attrition rate, thus preventing employees from moving to competitors, etc., in my opinion. A straightforward case in isolation should not cause much concern, and other employees may also appreciate the signal as a step in the right direction by the management.

In fact, the trend, as we hear, is to hire retired employees as retainers with suitably designed packages even from outside for their valuable experience, which cannot be obtained from younger employees, especially when there is a talent crunch all around.

In a unionized environment, one may have to establish norms of objective practice to avoid a sense of favoritism towards certain employees, with a view to gaining the confidence of the union and preventing emotional objections and issues that may block claimed promotion chances of juniors in the pipeline - just mentioning this for awareness and consideration.

Granting a retention extension to a retiring employee is a good HR practice not to worry much about, in my opinion, based on the needs of the organization - in general.

One could consult with the labor advocate/consultant of the company for any implied legal issues and court precedents, if any, under certain circumstances - more for personal knowledge and to be on a confident footing.

Hope this helps.

Regards,
Kshantaram

Dear all,

While I endorse the view that there are no legal hurdles in continuing his service on an extension basis (same to same in all respects) or appointing him as a consultant for a specific assignment with specified terms, retaining him on a retainership basis primarily to train an understudy to take up the responsibilities, I am of the view that PF is not needed if he has crossed the age of 58 years. One is entitled to withdraw from PF after reaching 58 years of age. I have experience using retainership appointments, and it has worked wonderfully well for the company.

Regards,
KK Nair

Hi Friend,

It definitely depends on management decision. If the management is willing to offer legal payment, you can continue with the existing role provided the service could be extended (one year).

On the other hand, if management doesn't continue with legal liability for him, you can settle the existing contract of service and issue a fresh agreement as per requirements, such as consultant or retainer, etc.

Rajasekaran.MK

Take him as a consultant or extend his service until you need. No matter what his age is, as long as the person is physically and mentally fit to perform his duties.

Please let me know if you need any further assistance.

Dear Rajesh,

If an employee is about to retire, the following steps should be followed:

1) Ask him to submit resignation and make his settlement (if he has reached the retirement age, resignation is not mandatory) and issue a letter from your end stating that he has attained the retirement age.

2) Take him as a Retainer on a Fixed Term Contract (FTC) for eleven months (Make a separate appointment letter). No statutory benefits should be given to him as he/she has retired from the services of the company.

3) If the company wants to deduct PF, they can deduct 12% on Basic/consolidated pay; no EPF should be deducted. If the employee is working in AP, P.Tax should be deducted.

4) Finally, his job nature should be on a consultant basis and it should not be on a regular basis.

Regards,

Sekhar

It is better to let him retire with all his benefits. After that, the company can hire him as a consultant. This will be beneficial to both considering all points and views of the work area.

I am satisfied with this answer, but are the above-mentioned things in any act book, or referenced book suggestion will be much more knowledgeable.

Thanking you,

Suraj Biswal

No, my dear friend, you will not find such things in any HR textbooks. These are practical aspects that come from experience. That's why this forum is so useful, as we can share and benefit from others' experiences.