Navigating Contractual Agreements, Taxation Implications, and HR Policies in Global HR Management

Dear Seniors, I am new to this forum and also to HR in India, so I am hoping to get your expert advice to help me understand more about this. Currently, I am working in a company in Singapore. We are expanding our business in India, so I am tasked to handle overall HR there. I was wondering if you could advise me on where to start.

Contractual Employment and Taxation Relief

I have some staff who have already started work as contractors. We wanted to give them full-time employment, but they insisted on getting a 10-month renewable contract as, according to them, this will provide them with some kind of taxation relief. Could you please help me understand how this works and if there will be any implications if we give them a 10-month contract and renew it with a 1-day break in service? I have scratched my head trying to figure things out but failed.

I would appreciate it if someone could help me and shed some light on this matter.

Thank you all.

Regards, Shelly

Congratulations on receiving such a significant responsibility from top management, as they have entrusted you to perform. You may proceed with confidence.

Establishing HR Policies

In my opinion, Ms. Shelly, as an HR professional, you must establish your company's HR policies. As an HR manager responsible for all activities within the department, you cannot be overly flexible in adapting to employees' or contractors' needs or expectations.

Some may try to evade tax liabilities, but as a company and as an HR professional, I will not support the idea of renewing a contract after just one day of leave. While occasional instances may be acceptable and welcomed by the company, frequent and large-scale renewals (especially for contractors) could potentially create significant issues for the company in the future.

Enforcing Policies and Exploring Options

It is crucial to establish your own policies and enforce them strictly within the company. If there are concerns regarding contractors, explore other options. There are numerous contractors available who can adhere to your policies. The decision to renew contracts and their duration should be at your discretion; the company cannot solely accommodate the contractors' preferences.

Expand your search for contractors and focus on building robust policies rather than solely relying on flexibility.

I trust that you will effectively address this situation by analyzing the procedures, company needs, flexibility boundaries, and available resources. I am confident that you will demonstrate that the decisions made by top management were indeed correct.

Best Wishes.

Regards,
Manish Srivastava
H.R & ISO Consultant (QMS/EMS/FSMS)
[Phone Number Removed For Privacy Reasons]
[Email Removed For Privacy Reasons]

First of all, welcome to India. Normally, contract or assignment-type agreements are made for a specific period. If the job warrants a regular assignment, it is unfair labor practice and also bad under the law to have such agreements with the intention to avoid granting a permanent job. But in your case, it is the employee who wants it; hence, you may agree. Yet, after working for 240 days (one day or one week break is equally bad in law), they can claim regular employment.

Regards,
Kannan

Thank you very much for your advice, and I greatly appreciate your words of motivation. The labor laws in Singapore are quite straightforward compared to India, and in my company, we normally don't encourage making exceptions like this. However, these two individuals are handling key positions that require niche skills, so we agreed to their terms.

At the same time, we want to avoid any kind of legal trouble. I was going through some income tax exemption clauses, but I couldn't find anything related to this, so I can't figure out how they are able to evade taxes if they don't complete the full year. Their income tax will be calculated based on the total earnings in that year, and eventually, the next contract will also fall into that year. I can't see any escape... I think I need to read more about taxes these days... sigh!

Regards,
Sherry

Dear Kannan, Thank you for your advice. The staff are not willing to take up permanent positions, but they assured us (verbally) to stay with us for 4 years on a renewable contract basis. Can we put some clause in our contract to state that they are bound by the contract for the full term? Currently, we are only offering them a 10-month contract, relying on their words... I know it's complicated and not right in any way, but we can't afford to lose them. Therefore, we have to bear with them and their unreasonable conditions.

Regards,
Shelly

In addition to the wonderful suggestions by the respective members above, I would like to share the following links which will help you to understand the concept and basics of an HR Department and the setting up procedure:

- [How to set up HR functions for a newly started company](https://www.citehr.com/136789-how-set-up-hr-functions-newly-started.html)
- [How do I set up a new human resources department](https://www.citehr.com/108493-how-do-i-set-up-new-human.html)
- [How to set up an HR department in a new organization](https://www.citehr.com/249203-setup-hr-department-new-organisation.html)
- [How to set up a new HR department](https://www.citehr.com/65299-how-set-up-new-hr-department.html)
- [Starting up an HR department with affirmative action](https://www.citehr.com/2069-starting-up-hr-department-affirmative-action.html)
- [How to start up HR with affirmative action](https://www.citehr.com/6382-how-start-up-hr-affirmative-action.html)

Dear Sherry,

You are welcome anytime if I can help you out at any point. I put myself in your place for a while and assumed the kind of pressure you might be facing at this time. It is indeed tough when you have to rely on others' words to retain such important individuals under their own conditions. The reality is that life must go on, as you do not have other options but to continue with their conditions.

I still suggest that if you can establish a judicial bond to ensure they do not leave your company for the next four years, it would be the best deal from your side. It's challenging, but any type of written agreement, official or unofficial, with one or two important witnesses will demonstrate your competency and long-term vision approach while fulfilling your role and responsibility.

There are always hidden ways to find a solution. They might be small, but they could lead you out if you reassess the options.

I hope your next reply will inform us that you have resolved this problem at your own level and under your own conditions.

Eager to hear from you soon.

Best Wishes,

Regards

I am also facing the same situation that Shelly is. Kindly help me in creating HR policies such as induction procedures, leave records, appointment letter formats, salary sheets, etc.

Regards,
Sheetal