What is wrong in recruiting directly by the company when there is an HR person employed mainly to do this activity? In such cases why should we engage any Recruitment Agency and pay them the service charges? There is no need to give this function of finding the candidates to somebody else when we have an HR person to do this.
Now if your query is about outsourcing, then also I would say that there is no need to engage people through a contractor (man power agency) but we can directly employ people and save service charges.
Regarding consolidated pay, nowhere in the law it is stated that you should not pay a lump sum amount as remuneration but your total remuneration should contain components like basic salary, HRA, Conveyance etc. There can be exception that when we fix minimum wages there can be an element called variable dearness allowance. The purpose of this component in the salary is to adjust the wages according to cost of living indices. In the absence of this element we will be refixing the salary only after, say,12 months, but if you have DA as a component you will be able to increase the wages periodically (in some states it is done in every 6 months whereas in Kerala it is done every month) based on increase in the consumer prices. At the same time, if the total of basic and VDA is equal to the sum paid as consolidated salary, there will noot be any illegality.
Not giving PF and ESI is a different story. If, in order to avoid ESI and PF, the employer fixes the salary above Rs 15000, say, Rs 15100, then also you cannot question it because legally the employer is correct. But at the same time, the amount of gratuity which is normally calculated based on basic and DA components of salary would be available to the employee on a higher amount, Rs 15100, ie, the consolidated sum. Similarly he will get leave encashment, other terminal benefits based on consolidated sum.
Suppose the PF and ESI increase the salary ceiling from the present Rs 15000 to Rs 16000 or 25000, then what will the employer do? Will he increase the salary and make it above 16000 or 25000? We cannt say what amendment can happen to law tomorrow.
Madhu.T.K