Can We Rehire Retired Employees Full-Time? Seeking Advice on Company Policy

Dear Seniors,

The retirement age for an employee in our company is 58 years. Two of our employees will attain 58 years next year. As per company policy, a person retires at the age of 58 years, and we have to prepare their settlement and close their account. Can I reappoint a retired employee on regular rolls for full-time?

Regards

It is advisable to hire the employee as a consultant/contractor and then rehire them on a permanent basis. The reason behind this is that the company policy requires preparing the final settlement and closing their account. By not following this process, you would be contradicting the policy. As the HR and compliance in charge, if you do so, it sends a wrong signal to other employees. An HR professional is a policy maker, not a policy changer.

This is my view; I encourage other senior members to share their perspectives as well.

I totally agree with the views of Mr. Saji. As you have mentioned, your company policy states that when a person reaches the age of 58 years, they are required to retire. This clearly indicates that beyond this age, an employee cannot continue as a regular employee of the company. If they can, then what is the benefit of the Retirement Policy? Therefore, the reappointment of a retired employee on regular rolls is not possible.

This is a common situation faced in the industry. The best solution to this issue is to appoint these types of employees on a yearly contract basis and compensate them accordingly. This way, you can make use of their experience and services within your organization.

There is nothing wrong with reappointing an employee upon retirement, except that you will have to settle their account and appoint them again with the necessary documents. The only thing is you must be satisfied, or rather the management must be satisfied, that due to their reappointment, the company benefits. You must substantiate this point.

Advantages of Reappointing a Retired Employee

1. The cost of the employee is less.
2. Workwise, they will be the same, and you can get the work done.
3. The company is not committed, as they can be discharged from service at any time.
4. Since they are an old employee, you can expect the same loyalty and sincerity, rather than from a new employee.
5. An old employee knows the company very well, and you can rely on them.

Regards

Thank you for all your suggestions, seniors.

Dear Saji, I am not contradicting; I have just posted my query for suggestions. I know, as an HR & Compliance Incharge, what my responsibility is. I don't want to set a wrong example or contradict any laws. I have posted my query for advice from you, seniors. I am not changing any policy or deviating from any policy.

Dear Seniors, if I appoint them as consultants or on a contract, what about PF, EDLI, and gratuity? Do I have to enroll them for these benefits or not?

If you appoint such employees as Consultants or on a Contractual Appointment, then EPF, EDLI, or Gratuity will not be applicable to such appointments. However, let more comments come on this.

Thank you.

In my view, you can simply continue the employee by issuing an extension letter. No regulation stops you, and I don't see any malpractice in it. As long as the employee is mentally and physically fit to perform, you can continue him/her as an employee.

The company hires a retired employee as a retainer or consultant to provide support and expertise in running the business. For the services rendered, he will submit bills, and the finance department may deduct income tax accordingly. As a consultant, he is not eligible for any statutory benefits.

Regards

You can go with what fellow members have said, like appointing the retired employee as a consultant or on a contract. You can also rehire him on your payroll because there is no law for private companies that specifies an age limit for retirement. You can give that particular employee an extension of services, do a full and final settlement, and then rehire him by modifying the retirement clause in the appointment letter. Generally, most appointment letters include a retirement clause with a specified retirement age, which you may adjust in the appointment letter.

Regards,
Ashutosh

No, you can utilize his services if he is willing, under any contract on a temporary basis. He will receive wages as per the terms of the contract. After 58 years, his final dues have to be settled. However, on subsequent employment on a contract basis, statutory deductions like PF can be made in a different account.

Normally, companies, when rehiring the services of a retiring employee, treat him as a consultant or employee on a contract basis. The contract period may vary depending on the company's requirement for his services, his performance/contribution, the health of the employee, etc. Generally, it is on an annual contract basis, renewable at the discretion of the company.

Advantages and Disadvantages of Re-employing a Retired Employee

Regarding the advantages of re-employing a retired employee, while there are many advantages as mentioned by the contributing member 'Launchpad', there is also one glaring disadvantage of not being able to bring in newness in the workings/systems.

Regards,
S. Dass

While others have responded to your query, let me add my thoughts as well.

Retirement Policy and Re-employment Options

The policy of your company is that employees must retire at the age of 58 years. However, it is the desire of the company to re-employ the person after formal retirement takes place. There is no statutory requirement for retirement, as far as private companies are concerned. You are free to decide either way (re-employ the person or retain the person as a consultant) and also change the age of retirement as is felt appropriate.

Suggestions for Post-Retirement Engagement

1. Let the retirement take place, followed by the full and final settlement in the normal course.

2. It is preferable (as suggested by several others already) to retain (not re-employ) the person as a consultant. This would provide continuity and benefit from the knowledge that the individual brings to the table. I would not suggest that he be re-employed as an employee, since (apart from having to change the policy) this could be cited as a precedent by others who may retire later and seek re-employment. On the other hand, a company is free to appoint anyone as a consultant - it will not be possible to cite this as a precedent.

3. Regarding the allowances that would have been payable to the employee during his employment period (PF, EDLI, Gratuity, etc.), you could take a Cost-to-Company approach, i.e., gross up all the allowances payable as a part of salary and pay the person the grossed-up amount as consultancy fees. This would ensure that while the individual is no worse off financially, they also retain the flexibility to invest the surplus funds in instruments of their choice. Since a consultant is not an employee, benefits like PF/Gratuity, etc., would not be payable.

I hope this helps you in arriving at an appropriate decision.

Regards,
Raju Bhatnagar

Retired employees who are re-engaged are called Third Age Employees. If you think taking a third-age employee has become necessary in the current circumstances, then consider the employee who has just retired. If he gives consent, then you can re-engage him on a contract or part-time basis. Note that third-age employees are experienced and can push companies ahead of their competitors.

To all my seniors over here, I just want to ask a question further to this. What will be the scale of PF and ESI for the said employee who has either joined back as a consultant or rejoined as an employee? Will the old scale that was applicable when he was employed continue in its calculations of PF and ESI?

Dear Members,

By reading all your conversations, the following points should be noted:

1. The retired employee cannot be enrolled on the rolls.
2. As per the company policy, he has to retire.
3. You can appoint him as a consultant by deducting 10% as a professional fee.
4. He can utilize the company services, but he is not eligible for EPF or EDIL.
5. As a retired employee, you can provide some facilities like medical and transport.

With regards,
Siva Sai Gopal.Komma
MosMetro India Pvt Ltd,
Chennai Metro Rail Project
Chennai

There is no issue with the re-appointment of a retired person on a tenure or contract basis. Even the government appoints many retired senior officers, including IAS and IPS officers, to various posts to utilize their services in the public interest. Your company is established under certain laws and acts. You can modify your policy to consider the need for experts in your company and re-appoint experts after retirement in the company's interest. However, they cannot be given the regular time scale of pay. They can be accommodated on a consolidated salary on a temporary basis.

Regards

Retired employees can be retained as consultants or on a retainer basis. There is no hitch in engaging these assets with your organization. An agreement between your company and the consultant can be executed under The Contract Act of 1872. This is the safest way to reward a good outgoing member and asset. It will help build strong bonding among your HR professionals.

Thanks,

Regards

Retirement Policy and Reappointment Guidelines

As per the policy of the company, the retirement age is 58 years. Every employee of your company shall retire upon attaining the age of 58 years as per the rules of the company. If you wish to reappoint any employee after retirement, your company has to make a policy decision regarding the reemployment of such employees by offering some honorarium or a consolidated salary based on the company's personnel requirements. There may not be any objections. However, you must settle all retirement benefits for such employees according to your company's rules.

Once an employee retires from your company upon reaching the age of superannuation, they cannot be reappointed as a regular employee. If there is a need for such an individual in your company, you can hire them on a contract basis or an honorarium basis for a tenure period of one or two years, depending on the situation.

Consulting Roles for Retired Employees

Taking this discussion ahead, I would like to get your ideas too, please. The talk has been about how to extend the tenure of retired employees—should we have them as consultants or re-employ them?

On the other hand, what if we hire retirees (external) in our organization as consultants? For that matter, any employee hired in a particular function as a consultant at the time of inception in the company, but no appointment letters are issued to that effect?

In the above case, during increments, would it be logical to issue increment letters to them, as they have been given increments in accordance with the hike pattern followed in the company? (We have not issued any formal letters to them as yet.) Similarly, what about salary slips? Do we issue the same to them as to the other employees?

Dear all,

Does "Reappointment in the same status as prior to Retirement" mean holding the same post after retirement? Will the subordinates in the same cadre be affected if their promotion is due?

Please, can anybody clarify?

Priya