Navigating Employer Liabilities: What You Need to Know About Home-Based Freelancers

Understanding Liabilities and Legal Obligations for Home-Based Employees

I have a website to display different kinds of articles/stories from various writers. However, the issue is that I require a few home-based typists to format all the articles/stories uniformly so that I can showcase them on my website.

1. I would like to understand what liabilities I should have towards my home-based/part-time employees.
2. Are the laws related to contract labor applicable to freelance workers?
3. What are the essential things that need to be included in the agreement to be signed by the employees?
4. Should I request a refundable security deposit from them to ensure they take their work seriously?
- If yes, would I be required to pay tax on this security deposit since it is refundable based on the good work of the freelance worker?
5. Do I bear any liability towards my employees if they submit careless and poor work that I cannot use?
6. Should I pay them the full amount of their payment, or do I need to deduct any taxes from their salary?

I hope you can provide guidance on these queries. Thank you.

Answers to your questions according to my knowledge are as follows:

Liabilities Towards Home-Based/Part-Time Employees

1. I just want to know what liabilities should I have towards my home-based/part-time employee?

Ans: You have no liability towards part-time freelancers. However, you should not consider them as employees on salary. Instead, you should pay them fees for the freelance job work they do.

Applicability of Contract Labor Laws to Freelance Workers

2. Is the law related to contract labor applicable to freelance workers?

Ans: The law relating to the Contract Labor Regulation and Abolition Act (CLRA) is not applicable in this case. The agreement between you and them, whether expressed or implied, is considered a "contract for work." Additionally, they are not working on your premises.

Essential Clauses in the Freelance Agreement

3. What are the necessary things to mention in the agreement to be signed by the employee?

Ans: It is essential to mention that the job work given to them is on a freelance basis and that they will work from their home. They will be paid fees for their freelance job work. It is important to clarify that there is no employer-employee relationship.

Refundable Security Deposit for Freelancers

4. Should I take any refundable security deposit from them to ensure their commitment to work seriously? If yes, should I pay tax on this security deposit since it is refundable based on their performance?

Ans: You can take a refundable security deposit. There is no tax liability on it as it is refundable based on their work performance.

Liability for Careless and Poor Work

5. Should I have any liability towards my employee if they submit careless and poor work that I cannot use?

Ans: Please refrain from referring to them as employees. You can hold them accountable for their careless and poor work. Deductions can be made from the security deposit for such instances. However, you are not liable for their negligence and substandard work.

Tax Deductions on Payments to Freelancers

6. Should I pay them the full amount of their payment, or do I need to deduct any tax from their earnings?

Ans: Avoid using the term "salary." Tax Deducted at Source (TDS) is applicable as per the work contract rate, but ensure you have a Tax Deduction and Collection Account Number (TAN) allotted.

I hope this helps clarify your queries. Let me know if you need further assistance.

The clarifications given by Mr. Keshav Korgaonkar are to the point and correct. I may add that you need to deduct the TDS at a rate of 10% on the contract payment and deposit it with the income tax department as a professional fee. You also need to have both a TAN number and a PAN number for your startup enterprise.

Regards