Hiring Challenges: Can We Legally Hire Employees as Consultants Without PF?

Hi all,

We are a start-up company and we have some issues in hiring staff as employees as most of our employees previously were from the unorganized sector where there was no PF account created for them. Since they are unwilling to contribute any amount towards PF, we would like to hire them as consultants.

I would like to know whether there is any statute or guideline that governs hiring of staff as consultants. What are the legal implications for the same?

Dear Vivek,

There is no law that can stop you from doing that, but it makes no sense to have almost the entire staff as consultants. First, there would be no bonding as a consultant in nature means project work or limited-time employee. Secondly, if there has never been a PF employee before and you are paying them a Basic+DA more than 15K per month, then as well, fill up Form 11 and get them out of the PF ambit. Hiring all of them as consultants is not the best option.

Regards,
Ashutosh Thakre

Dear Ashutosh, Thank you very much. However, we have a problem with that as the basic + DA is not more than 15,000, and some of our employees are covered under the PF net. The incoming staff do not want PF accounts. Even though we tried to convince them about the benefits of it, they are resolute in wanting more take-home pay rather than future savings. Since they come from an unorganized setup where there was no PF or any taxes, we find it difficult to recruit these individuals.

That's the reason we thought we would hire them as consultants.

Thanks & regards,
Vivek

It is not a question of whether the employees like it or not; it is a question of law and its compliance. Please keep that in mind. Besides, if you contravene the PF law in particular, the firm's owners/directors/partners are exposed to the risk of prosecution and can even be arrested. Fines are heavy. Consider these consequences also before taking a decision.