Dear Ashleyji,
It's absolutely OK for you. There is no ban under any law of the land. I think you wanted an experienced person in your staffing and he could be engaged on regular basis with suitable pay scale or consolidated remuneration as your co. deems fit considering his utility value for your firm. Even continuing his EPF also OK provided if had previously one EPF A/c.but not yet closed, same a/c. could be continued, but no pensionary benefits will accrue to this extended service. Similarly ESI. This shouldn't be a problem as he might be fixed above Rs.15000 scale. To get over this you may arrange for him a health insurance policy like mediclaim which should take care of his health needs. If necessary you have to amend your HR policy/Rules suitably to accommodate such requirement.