Feeling Like an Employee but Labeled a Consultant: What's the Real Difference?

Hi Friends, I have recently joined as a consultant. They are treating me as an employee, but when it comes to facilities, they are saying that is not applicable. Can anyone suggest to me what is the difference between an employee and a consultant?

Except for the 10% TDS, there are no statutory implications on consultants. The consultant's requirement will be time-bound, with no permanency, and they will not be on the company's payroll. The rules and regulations of the company do not apply to the consultants. Even the working hours and days will be as per the agreement.

Regards,
Kamesh

Please clarify your point. Are you a regular employee, or are you providing external consultation?

Regards

In my opinion, an employee is a person who performs their duties according to the rules and regulations of the company on a permanent basis. The company provides benefits to the employee. On the other hand, a consultant is appointed for a specific project or to solve a particular problem. Consultancy is not a full-time job, so the consultant is not eligible for such benefits.

Thank you.

It appears from the query raised by him that the company has appointed him as a regular employee. However, instead of giving an appointment letter, the company has made an agreement with him as a professional for rendering his services. Neither the company provided proper information nor did he delve into details at the time of appointment. He might not be aware of the difference between a professional/consultant and an employee, as the understanding and paperwork differ.

Nowadays, such arrangements are common in many places to avoid statutory liabilities, compliance issues, and legal headaches.

Regards,
Pramod Thakar

Dear,

Going by your query, it appears you are a consultant, not an employee. Just on some pretext, one can't claim to be an employee. What facilities, concessions, etc., the consultant could enjoy is a matter of your terms and conditions of appointment. It should be clearly spelled out. For example, you may be entitled to much more than an employee would be, such as a car, boarding, lodging, an unspecified time schedule, absence of a probation period, etc. But clearly, you may not be entitled to some benefits such as PF, gratuity, ESI, bonus, etc. A consultant's remuneration could be either a lump sum for the entire assignment or for a tenure payable monthly. Of course, TDS @ 10% if it exceeds the threshold limit. You will be governed by the Contract Act rather than Labour Laws. It's better to consult your appointment order for more clarity.

Regards,
Kumar.S.

Difference Between an Employee and a Consultant

A person who works full-time and receives wages for their work is considered an employee. In contrast, a consultant is engaged for a retainer fee by an employer to provide advice on specific matters. However, a definitive answer can only be provided after reviewing the full terms and conditions of your appointment letter.

Regards,
V Hariharasubramanian

An employee serves the company on a full-time basis, while a consultant undertakes specified work on a contract basis.

Regards,
D. Gurumurthy
HR/IR Consultant

Consultant Vs Employee - A Nice Thread

Kindly clarify whether a "consultant" is eligible for privilege leaves like earned leave, casual leave, and sick leave, as given by the company to employees. Can a "practicing Chartered Accountant" work as a "consultant" for different companies? In case he does not turn up on time during office hours, is not available for statutory inspections for which he was appointed, and does not take responsibility and onus on his job profile as a consultant, what action can we initiate?

The other members have adequately explained the difference between a consultant and an employee. However, mere designation or nomenclature will not be a determinative factor. It is the terms of your contract and the way you are treated by the employer that will determine your status.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Dear,
Without verifying the terms and conditions of consultancy, it is not correct to comment. However, normally there won't be formal leave or office timings for consultants unless they are required to work at your office on a regular basis. This is due to the fact that there is no employer vs. employee relationship. Nowadays, many firms hire individuals as "Consultants" to handle statutory work like PF, ESI, VAT, TDS on a regular basis even though they are not strictly consulting on other matters. Strictly enforcing timings on Chartered Accountants would depend on the working arrangement agreed upon with the reporting officers/HODs and their rapport with them. If you wish to take action, it would be better to consult the competent authority in your company.

Regards,
kumar.s.

Understanding the Role of a Consultant

A consultant holds an advisory status similar to that of solicitors, auditors, etc. The employee-employer relationship is typically a boss-servant type relationship. Being a consultant is prestigious, whereas an employee position is considered as one among the staff.

Nowadays, multinational corporations (MNCs) tend to appoint experienced professionals as consultants only, as everyone knows how to bypass statutory obligations. An employee can work with only one employer, whereas a consultant can work with many concerns.

Regards,
R Swaminathan

Understanding the Term "Consultant"

Consultant is a very vague term and defines nothing. A full-time employee receiving all statutory benefits can be designated as a Consultant. Most IT companies have full-time employees designated as Consultants. Nowadays, Consultant is merely a designation and nothing more.

Differentiating Between Regular Employees and Professionals

The only basis or document to differentiate between a regular employee and someone working as a Professional is the employment contract. There are court rulings where the court has stated that what matters is the employee's job profile for obtaining statutory benefits under different labor laws, not the designation.

Trends and Legal Implications

Nowadays, it has become a trend to designate an employee as a Consultant to evade the responsibilities of providing statutory benefits. Due to all these manipulations by employers, the term employee is being redefined under different labor laws. The Payment of Gratuity Act also redefined the term Employee.

Employment Contracts and Job Profiles

I have seen a few employment contract letters that contradict the given job profile. For instance, an employment contract letter designates someone as a Consultant, whereas that individual has been assigned not only an advisory role but also an executive role. From a legal standpoint, a Consultant can only have an advisory role.

Regards,
Kamal

Here is an interesting list that you might find helpful when considering whether someone is employed or self-employed via a consulting arrangement. The authorities will tend to look behind the words of any contract and examine the substance of a relationship.

FACTORS TO CONSIDER RELATING TO EMPLOYMENT STATUS

The following is a list of considerations when reviewing employment status.

1. Does the individual personally have to do the work, or can they hire others in their place?

2. If the individual can subcontract the work, they are more likely to be self-employed.

3. Can the individual be controlled (even if that control is not necessarily exercised) as to where they work, when they work, and what work they do?

4. If the answer to these questions is yes, this is a strong indication of employment.

5. Is the person recognized as being part and parcel of your own organization? Do you have direct employees who do the same or similar work to the “self-employed” individual?

6. If so, it is very likely that you are treating the worker as an “employee.”

7. Does the individual work wholly or mainly for one organization?

8. This is a likely indication of employment. However, a particular self-employment contract may be lengthy and involve all or nearly all of the self-employed person's time and work. Other individuals may work for a number of persons, for a relatively short engagement each time, but each of those engagements could be as an employee. A worker could be engaged for just one day and could still be an employee.

9. Does the person provide the materials to carry out the work? Do they supply their own tools and not just the ordinary small tools that many employees provide?

10. The more the person provides and risks their own materials and resources, the more likely they are to be self-employed.

11. Does the individual control a business organization? Are they in business on their own account? Do they pay their own workers?

12. These factors indicate self-employment. However, someone can be self-employed and still be an employee of a particular person, due to the nature of the work and the relationship between the two parties.

13. Does the person get paid for all time worked? Do they get paid by the week or the hour? Can they be paid overtime and holiday pay?

14. All these factors are strong indications of employment.

15. Does the individual tender for the job? Will they be paid the same amount regardless of how quickly or slowly the work is completed? Do they have to correct incorrect work at their own expense? How well can they profit or lose from how efficiently they work?

16. All these are good indications of a “true risk-taking self-employed entrepreneur.”

A person working full-time exclusively for a single employer and a person working for multiple employers can be termed as a consultant. However, in the first case, there is an employer-employee relationship, whereas in the second case, there is no employer-employee relationship. Under any circumstances where there is an employer-employee relationship, the person is entitled to all statutory benefits, even if he/she is working as a consultant.

It is important to note that any contract or agreement signed between two or more people that is contrary to the law or act of the time is null and void from a legal point of view.

Understanding the Difference Between an Employee and a Consultant

I have recently joined as a consultant. They are treating me as an employee, but when it comes to facilities, they are saying that is not applicable. Can anyone suggest to me what is the difference between an employee and a consultant?

As per your valid contract with the company, all terms and conditions are laid down, so just go through each and every point. Whoever works as a consultant for any organization is not treated as an employee and is not applicable for any welfare facilities. Only basic infrastructure is provided, but the management of that organization will obviously expect more results or determination from the consultant than its employees.

A consultant is someone who provides directions or helps the management with its operations/functions to be more profitable or systematic. Based on their suggestions, the management will guide its employees to work in that direction.

Regards,
Yogesh

Employment Contracts and Employee Rights in India

This is for HR professionals who are decision-makers in employment-related matters.

The courts in India have reviewed such conditions (establishing employer-employee relationships) and categorically ruled that any "negative covenant" in an employment contract does not curb an employee's rights to seek statutory benefits.

Regards,
Kamal

Dear All, we have advisors. However, despite treating them as advisors, they still have cheque-signing power, etc. I haven't mentioned their names in the attendance register. Is it required? Like others, they also receive a salary per month, with regular professional tax deductions. I believe this is the wrong procedure.

I kindly request clarification from all of you on whether this procedure is correct or incorrect.

Regards,
Murali

Dear,

What does their appointment order say? Are they Advisers, Consultants, or Employees (in which case, what Designation)? If they are employees, then you should enter them in your attendance register. If not, you need not list them in the General Attendance Register. However, you can maintain a separate Attendance Notebook to record their working days (Advisors or Consultants do not necessarily need to sign the Attendance Register, but you will keep an Attendance Book to have a record for remuneration or Conveyance Expenses, etc.). TDS, as applicable, has to be deducted.

There is no objection to giving them cheque signing authority or making monthly payments.

Regarding Professional Tax, they need not be included as they are not considered your employees.

It is common for retired government officers to be engaged as Advisers or Consultants to handle statutory matters like Excise, Tax/VAT, IT, ESI & PF, etc. They could be part-time or full-time depending on the arrangement between the firm and these individuals.

Kumar S.

Do they have an appointment or any board resolution? Retired senior employees are given certain powers even after retirement, but there should be some written documentation. If you could forward such a document, it would be easier to provide a proper response.