Hiring Freelancers as Contract Employees: What Are the Legal Steps and Documentation Needed?

Dear seniors,

I have a small clarification regarding employing a candidate on a contractual basis. Could you all please help me with the following questions?

1) Can we hire an employee on a contractual basis? Specifically, I am planning to hire a freelancer as a contract employee.

2) If yes, what type of letters can be given to those candidates? Are they similar to appointment letters or different formats? Please assist me with the formats.

3) Kindly confirm all the above based on legal and labor laws.

Guide me on how to proceed further as it is an immediate need.

Looking forward to your reply.

Gayathri

There is nothing wrong in appointing an employee on a fixed-term contract basis, say for one year or even for three years at a time. This is open especially in the case of such employees or employees of a particular grade who are not expected to stay back for long years. The letter of appointment shall be the same but with a specific mention that "your appointment is purely for a Fixed Term of one year/two years/three years from (date) AND AS SUCH YOUR EMPLOYMENT WILL BE TERMINATED ON (date).

But being employed on FTC does not mean that the employee will not be eligible for any benefits that others enjoy, like EPF/ESI, leave, etc.

Regards, Madhu.T.K

Dear Mr. Govind,

I have seen your response to the postings of Mr. Pankaj. Though it is useful, I would appreciate if you or anyone could elaborate on the followings.

1. As per my company's (Construction Nature) policy, the retirement age is 58.
2. We have selected a candidate who is nearing 60 years, who earlier worked at our Dubai Operations to head the Safety Department at our Chennai office. Now, we will not be able to employ him as a regular employee as he does not fit into our policy. If we employ him as a consultant against a lump sum fee, what will be the privileges like leave, gratuity, etc., enjoyed by others? And what will be the service tax that he is supposed to incur from the fee we pay to him?

Thank you for your attention.

Regards,
Shankar Kumar
Manager HR, SIPL.

Dear Ms. Gayatri,

In case your establishment has a standing order certified under the Industrial Establishment Standing Orders Act, it is advisable to incorporate "fixed term employees/workmen" as one of the categories under "classification of workmen". You would notice that there are no restrictions on the number of fixed term employees/workmen in an establishment. There may not be any problem if a couple of employees are employed on fixed-term contracts. However, if a large number of employees are employed on fixed-term contracts, their engagement as fixed-term employees itself could be challenged on the ground that the certified standing orders do not provide for such a classification. Whatever may be the outcome of the litigation, it will be of nuisance value to the employer.