Hiring 500 Employees at Rs. 5000/Month: Should They Be Consultants or Employees?

Our company wants to recruit approximately 500 resources for whom the salary is Rs. 5000/- per month. Can any of you guide me on how we can pay them the salary? We have to pay Rs. 5000/- per month to them without any deduction. Should we hire them as consultants or as employees? If as consultants, then what formalities need to be followed?

The only available trick is to appoint them as part-time employees. However, if any of the employees complain, then you will be in trouble.

You can hire them as consultants on a contract basis and pay them the full amount without any deductions.

Thank you.

Even if you appoint contract labor, the statutory requirements such as minimum wages, PF, ESI, bonus, etc., should be covered. In case the contractor has not paid these, the principal employer will be responsible for them.

You may recruit them as trainees with a consolidated salary or stipend. You may empanel with a third-party (agency/consultancy) and recruit through them. You may also recruit them as part-time staff or seasonal staff.

You may recruit them as contract staff under your payroll itself as a 'Fixed Term Appointment,' where your mode of payment is similar to a consolidated salary with basic and HRA only.

Considerations on Employee Engagement and Legal Compliance

I have seen different views on the subject. Please first keep in mind that if your salary of Rs. 5000 is not less than the minimum wage, you can engage them. However, if they are not receiving the minimum wage, you are legally and morally wrong. Additionally, by avoiding their statutory benefits, you are again doing wrong by them.

If their work is part-time, you can engage them as part-time workers. But if it is truly part-time, please understand that taking full-time work and paying less is morally and ethically wrong, as in such cases, you are coercing them. They are the ones who earn you profits.

Professionally speaking, I will not advise you to get into this as you might end up getting into trouble with just one complaint to the Labour Department and/or various authorities. Also, denying only ESIC itself, which is applicable to them in any case, may land you in deep trouble if an inspection happens. Additionally, this will deny the employee such health benefits that they should receive. Hence, rather than promoting such things, we as HR professionals should condemn such arrangements that are anti-employee.

Hope you all consider this view.

Regards,

Hire interns through institutions or hire an apprentice. I would like to understand why your company is moving away from certain welfare acts that protect employees and employers from risks. The Minimum Wages Act requires paying wages as per the act. The amount of wages you proposed is much below the wages defined under the MWA. If one does not follow the basic rules of the coverage of acts, the risk is unimaginable. However, as an HR professional, you should communicate your concerns to the management and then leave the rest.

Recruitment as Consultants: Key Considerations

Recruiting people as consultants can be quite a problem. The organization will pay them a professional fee, and for this, the organization is supposed to deduct TDS at 2% or 10%, as applicable. The company also has to issue Form 16A for the same every quarter by filing the 26Q.

Even if you recruit them as contract employees, the principal employer is still liable to pay ESI and PF for the employees deployed. You can also recruit them as trainees and pay them a stipend for the probation period (training period) alone. However, you cannot keep them as trainees for an extended period of employment.

The above information is to the best of my knowledge. If there are any errors, kindly advise me.

Regards,
Karthik.D

As we are not calculating ESI on stipend, you can proceed with considering them as trainees.

By whatever designation you appoint, at the end of the day, you will have to pay them ESI, EPF, welfare fund, leave wages, bonus, minimum wages as per statute, etc. Then what is the logic in engaging 500 consultants? That itself shows that it is an attempt to reduce the burden. After all, they are engaged to get an end result. Then why don't you comply with statutory requirements?

Regards,
Madhu.T.K