Retaining a Retiring Manager: Should We Keep Him as an Employee or Hire as a Consultant?

Dear Seniors, One of our esteemed managers is reaching retirement age by the 31st of this month. We would like to retain his services and I have a few clarifications on this matter.

Retaining the Manager: Employee or Consultant?

Can we continue his role as an employee, or should we relieve him and re-hire him as a consultant? If we can continue as an employee, what are the conditions and exceptions such as PF, PT, TDS, etc.? If we re-hire him as a consultant, how do we pay his remuneration?

Kindly enlighten me on this, seniors.

You may continue to keep the retired employee on the roll. There is no prescribed age limit for retirement. However, after 58, there will be no PF deduction. Regarding PT, please check the rules of your state government. TDS deductions will be the same as for any other employee.

If you hire his services as a consultant, then TDS at 10% will be deducted under section 194J of the IT Act, 1961. However, in this case, his tax deductions will increase, and he will have to wait for the IT refund. Why do that?

Secondly, for a consultant, you cannot have regular office timing. Therefore, it is better to keep him as a normal employee.

Thanks,

Dinesh V Divekar

Thank you, Dinesh Sir. So, I understand from you that we can continue his employment without further amendments except his PF & PT. Secondly, we have mentioned in his appointment order that his retirement age is 60. Will this affect his continuous employment?

On retirement, the employee's appointment ceases. To retain them, you have to create a new contract, maybe as a consultant or temporary employee for a certain period.