Hiring Clerical Staff as Consultants for Short-Term Projects: What Are the Legal Guidelines?

Is there any statute or guideline that governs the hiring of staff as consultants? We need to bring clerical staff for a short-term project of 3 months. We do not want to create an employer-employee relationship as the staff do not want to enroll under PF.

You can recruit staff from the roster of any Tems staffing agency. The agency will manage all legal compliance.

Regards,
Harish Joshi

You can appoint them as consultants on a fixed-term basis with a fixed rate. 10% IT shall be included in the payout.

I hope this helps! Let me know if you have any more questions.

As you do not want to establish an employee-employer relationship, you can appoint them as consultants for a fixed term against a consolidated payment called Legal & Professional charges. You should pay them legal and professional charges against a bill for the professional services rendered during the month. In the absence of a PAN, tax deducted at source (TDS) on such legal and professional service charges paid will be double, as per provisions of the Income Tax Act/Rules.

Regards,
N Ramesh

Also, the consultant should not work from your office but only from their own home or office. If the consultant works from your office, it would add to your staff count.

You cannot appoint a clerk as a consultant.

Who is a consultant?

A consultant is someone who is consulted for advice. They will not be working for you alone, and their presence will not be required in your office from Monday to Saturday, from 9 am to 6 pm.

As advised by many members here, if you employ a person as a consultant and deduct 10% TDS from the "fees" paid to them, you will face charges from Income Tax, ESI, EPF, and many other labor departments. The Income Tax authorities will ask you what advice this clerk is giving you and on what basis they are attending your office regularly. In the case of Vs Wockhardt Hospital Ltd Vs Department of Income Tax, a similar question arose. The hospital was employing doctors as consultants and deducting TDS under section 194J, treating them as professionals. The Income Tax authorities found that these doctors were regularly employed and all the HR-related policies like leave rules, exclusiveness (not to work anywhere else), timing, etc., were applicable to them. It was found that these establish that they are not consultants but employees whose income should be subjected to deduction of income tax under section 192 as if they are paid salaries.

In your case, the EPF and ESI authorities will also demand contributions subject to coverage conditions relating to salary. They may demand it after several months, and by that time, the clerk you had appointed may have left the company, but you cannot escape from your liability; you should pay both the employee's contribution as well as your share of the contribution.

Therefore, even if your work is not regular but for a short period, you should not compromise on legal compliances. Appoint one person under a fixed-term contract for, say, one year or six months, paying them a 'salary' and deducting PF and ESI as applicable.