Legal Aspect Of Hiring HR Recruiters As \"professional Consultants\" Instead Of \"empl\"

We are a pvt ltd HR Recruitment company with a plan to engage 40-50 recruiters. Can we hire all work force as professional consultants instead of employees. Will PF & ESIC authorities have legitimate objections. We intend to keep only Directors as employees of our company. Kindly advice!

Dear Saket,
Greetings!!!
You can't do that for the simple reason that it's illegal.
As long as you are able to evade labour officers , it's great but kind of revenue that you should generate with this big workforce ( in terms of recruitment company), you will sooner or later , be found.
If you don't want to go for compliance, have a franchise agreement with all your recruiters and make terms in a manner which will give them some minimum fee ( equivalent to salary) and rest of the revenue sharing can be variable ( equivalent to incentive for achieving targets).

Hello Saket,
Shantanu/GroupHR has given you valid & realistic suggestions.
But what beats me is: WHY do you want to adopt this model, when you seem to be planning to move forward in a big way?
Doesn't really jell, from the general market practices perspective, leaving the legal angles.
Without casting any doubts about your intent, such practice is usually the preferred mode for Fly-by-Night operators in other sectors [more notably Multi-level Marketing]--to limit their legal & physical exposures.
Hope you get the point.
All the Best.
Rgds,
TS

I think surely they can work as 'Associates' as is done in law firms or chartered accountancy firms.
Then they will not be employees but part of the company with a rule laid down how they will share the income.
This will leave them free to go off when they want and also for the company to avoid a heavy permanent work force.

Hi Shantanu, TS & Rramx

We want to adopt such a model for the fact that the cost we will incur in maintaining compliance will be to the tune of 32% or more of salaries (PF-12%+12%+admin ESIC-4.75%+1.75%+admin). Irrespective of the fact who is paying it, it still remains an outflow for the new company & it's new employees. It will also distract our thin Mgt from core business.

The market scenario is such that a new HR professional is always game for "generalist profile" over "recruitment consulting profile" & through this model, we want to derive some respite on their take home and would like to inculcate profit sharing concept instead of incentives.

Such a model will also give us required flexibility to scale up & down as per market responsiveness. Once we derive, how to attract new talent successfully, it will be easier to create a success pattern for our Professional HR team to follow.

Alternatively, pls suggest, can we have only 9 employees & hire rest of the team as "Apprentices" for the time being ... say for a year or so. Pls suggest, if this is legal. This way we will be 30 apprentices & 9 employee company. Once we surge into 3rd or 4th yr from here, we can initiate ESIC.

Saket

Well, in case you really do not want hassle of PF and ESI for your recruitment then you have to totally change the model and make it just like a revenue sharing model and in this model you hire some freelance consultants for contract basis on a fixed fees as well as you may choose for paying incentive on achieving targets or sharing some percentage of profit with them.

Pl have them on roll employes and pay salary more than Rs.25,000/-p.m i.e. Rs. 25,100/-p.m. and thereby no hostile in terms EPF or ESI. Your liability is nil. Regards,
V.Murali

Hello Saket,
Like the Saying goes--there are Pros & Cons for EVERY choice/decision.
While the economics of hiring employees to work out-of-office would surely be good [less expensive], there COULD be operational hazards. One could be that your priorities COULD be different from their's. Another could be your Job Portal access COULD be misused. A few that I can think of.
While it would be vice-versa in case you hire them to work in your premises.
Based on your last posting, a trade-off model, like you mentioned about hiring employees & Apprentices/Trainees COULD be a good start. Legally, I don't think there should be a problem with this model--as long as you have the right paperwork in-place.
I can think of one way to cut-down on your costs [actually am working-out to implement it @ my office]--try to select those who NEED the job than those who WANT the job. You will also handle the job stability issues that are bound to arise along the way.
Hope you got the point.
All the Best.
Rgds,
TS

The thread starter is focusing only on cost. The Loyalty factor is forgotten. The loyalty to the company from direct employees can not be compared with the so called consultants.
Pon

The idea of 'Trainee' or 'Apprentice' can be sticky legally, specailly if they are in large number.
Besides no person with some experience or with stuff to contribute (against 'to learn') would accept such position.