How Should We Pay a Peon After Age 60 and What Compliance Issues Arise?

Please suggest the payment mode for a peon after reaching the retirement age of 60 years. Additionally, what are the other compliance effects for his payment?

Ask the peon to open a joint account in a nationalized bank. Monthly pension can be electronically transferred to his account. Other payments like PF and gratuity will also go into the same account. What exactly is the query? What I mentioned are normal modes of payment.

Completely agree with Mr. Nathrao's post. The only thing I would like to inform is that he needs to open a personal bank account. PF normally does not accept any joint account for the withdrawal of PF money.

It seems that the questioner is desirous of keeping the employee on post-retirement after settling his terminal benefit dues. If the payment mode he refers to is the employee's monthly compensation, it can be as usual or a consolidated sum equal to the last drawn salary plus the employer's contribution of EPF (as it is not required to be paid after superannuation).

I also strongly feel, like our senior learned member Umakanthan Sir, that the query pertains to the employment of a person after retirement and what are the due compliances. My comments on this query are as follows:

Questions to Consider

I would like to ask some questions here:
- If a person is to be continued after retirement, why was he retired by the company?
- Was an extension to his employment not possible?
- How can a person be taken on the payroll after retirement?
- When you take a person after retirement, what is the meaning of retirement?

Labor Laws Governing Employment After Retirement

Now, the fact is that the person is employed after retirement. So, what are the labor laws governing him? In my view:
1. He is entitled to wages as per minimum wage rates.
2. He is to be paid wages not in cash.
3. His name is to be borne on the muster roll and wage register.
4. He should be given all the benefits as given to other employees, and he should not be subjected to discrimination.
5. He is an exempted employee under EPF but not under ESIC if his wages are less than 21K.
6. Deduction of Professional Tax from wages shall be effected as per prevailing law in the state. In Maharashtra, Professional Tax is exempted at the age of 65 completed.

There is no concept of off-roll. In the peon category, you cannot take him as a consultant or settle his dues on a voucher monthly.

Case Study: Lessons from a Recent Incident

Recently, one of my clients faced a complaint from his retired employee. The retired employee was engaged duly on humanitarian grounds and was paid on a voucher every month. After serving for 7+ years post-retirement, due to his old age, he was asked to sit at home. He claimed from the company his full and final settlement, including the difference in wages as he was not paid as per minimum wage, leave salary for 7+ years, gratuity, etc.

I have quoted this example so that we in the HR fraternity should take some lessons from such incidents around. Members are requested to make comments on this posting of mine.

Recently, one of my clients faced a complaint from his retired employee. The retired employee was hired on humanitarian grounds and was paid monthly through vouchers. The hiring decision seemed to lack proper guidance from HR. While the intention may have been humanitarian, the necessary legal paperwork and due diligence should have been carried out. Compliance with labor laws, such as the MW Act, should have been ensured.

It raises questions about the process for claiming gratuity. Was the employee not entitled to gratuity earlier?

Discussion on Retired Person's Continuation in the Same Profession

Very good discussion on a retired person's continuation in the same profession and the same place. In my view:

- There is no rule to open a separate bank account.
- He is not eligible for PF pension. He is eligible for PF only (since he has a UAN number and is continuing in the same place).
- If he needs to open a bank account, he may open a separate bank account at any other bank.
- The employer has to provide an assurance policy.
- He is eligible for ESI if his income is below 21k.

Regards, Dr. PBS KUMAR

I have the same case in my organization. One of our Accounts Assistants retired after completing 9 years of service and reaching 60 years of age. His take-home salary at retirement was 16,000 per month. What amount of gratuity is to be paid?

Also, if my company decides, is it possible to retain his services further as a consultant and pay him consultation fees after deducting applicable TDS on the payable amount? Will there be any objection from PF or ESIC?

We have a practice/system to engage retired persons based on the requirements. After management approvals, we extend their service for 2 years by issuing a fixed-period appointment order. When fixing their remuneration, statutory benefits like PF, Gratuity, etc., are calculated based on their last drawn salary and considered in the consolidated salary. Only Professional Tax and TDS are deducted.

The question is, after retirement, since the person was a PF member, is it mandatory for the employer to deduct PF contributions and remit the same to their individual PF account?

Regards, Shikh.I.Y. Manager HR.

Re-appointment of Retired Employees on Fixed Term Employment (FTE)

When an employee retires from service at the age of 58 or 60, they can be re-appointed on the basis of Fixed Term Employment (FTE) for a certain period (e.g., one or two years). Their regular employment with the organization should conclude with a formal retirement. The following steps should be taken for this process:

1. Conduct a full and final settlement by paying all dues and retirement benefits to the concerned employee.
2. Issue a new appointment letter based on FTE, mentioning the new remuneration, which should be mutually agreed upon. This remuneration should be determined by considering the Minimum Wage Act, Bonus Act, Gratuity Act, etc.
3. Clearly state all terms and conditions, remuneration, leaves, and other benefits in the appointment letter.
4. Since the retired employee has reached 58 years of age, they are not eligible for pension benefits under the Employees Provident Fund. Therefore, PF coverage or contributions are not applicable.
5. After the completion of the FTE, the same employee can be retained by the organization on an FTE basis by executing a new FTE agreement.
6. The physical fitness and mental alertness of the concerned employee must be assessed.