Retaining The Retired Employee

Please send your suggestions for the following case:
One employee retired at the age of in an organisation during mid of this financial. We would like to retain the employee for some more years, not as an employee, but as a consultant or others.
We have decided to pay Rs.10000/- per month for his work. If we pay the amount as prof.fee, then we have to deduct TDS. We dont want to deduct TDS as his income during the financial year is below the Income tax Basic Limit.
Can we pay consolidated salary of Rs.10,000/- without ESI/PF/ or any other benefits?
Or
Tell your suggestions.

Dear Wilson,

If you retain the retired employee as consultant, then you need to deduct TDS. But then why don't you re-employ this person? If the person is physically fit and is in position to render the desired performance, then you can very well waive off the retirement age. Secondly, if he is above 58, then PF won't be deducted as such.

Retention of employee apart, there are few organisational issues as well. If this person has attained his age of retirement, then why succession plan was not made well in advance? Why his successor was not groomed before his retirement? Retaining employee after some specified age will send a signal to all the employees that your company is person oriented and not process oriented.

Perhaps this person may need employment but then juniors also need promotion. If you keep the retired persons on your rolls, it will block career advance opportunities of the juniors as well. Please consider this flip side of the situation also.

Ok...

Dinesh V Divekar

Dear Mr Divekar,
I am sorry i do not agree with your views that performance is restricted by age. Age is a limitation of the mind-you are old as you feel. The very fact that the Company wants to hold on to the employee speaks volumes of both the individual and the Comapny. The individual-is a professional with fresh ideas (you do not have to be young but well informed to present great ideas) and kudos to the Company for recognising talent.
Japanese Companies are the biggest recruiters of retired personnel.
Regards.
Colonel Jude Mayne

Thank you for your replies. But the Management has decided to retain that employee by considering various factors/reasons. Now we have to decide that at what name we can pay the amount without TDS. We dont want to avoid tax, but the person income is below the Basic Income tax Limit and it is very difficult to get refund(delay-more than a year) the TDS after filing return of income. Please send some more suggestions.

You can appoint him as a consultant and pay of Rs.1500/-pm as a consultancy fees and give reimbursement of conveyance of rs.8500/- so he will be out of esic,pfand tds.
Regd
Rokade

Retaining the retired employee
I agree to what the Managemnet has decided. Make an agreement with the employee as a consultant. Advise your Management to bear the TDS cost. Or otherwise you will be in deep trouble in future if the Management decides to appoint many retired employees as consultants.

Dear Wilson
As per the comments of our seniors if u wish to retain retired employees by paying Rs.10000/- as consolidated salary per month.
They need not be deducted PF if he withdraw PF accumulations by submitting Form 19 & 10-C
Coming to TDS part there are 2 things. one is Professional & the other one is contract
If we give him as professional charges 10% TDS will be deducted out of his bill as it comes under services.
If we given him on contract 1 % TDS will be deducted out of his bill
Hope the above is suffice

Vadlamani what you said is correct. Thank you for your good suggestion. Yesterday only,we have decided to give the amount as a consolidated Salary of Rs.10,000/-. We think that there is no TDS,ESI,PF or other statutory requirement. If anybody doesn't agree, post your comments. The retired employee already applied for his retirement benefits.

You can consider appointing the retired employee on fixed term
basis for a consolidated salary.
G.Balasubramanian