Mr Rithveek, in your first post you said,......hires an employee on contract basis....., that means you hire him for reward and make him work for a year, again ask him to go or he himself go (as you said he is not available for a month) for a month's vacation and then again come and makes an agreement with you for another one year and at the end of the year he again goes for a month long vacation to come back for signing another agreement. This is called fixed term contract employment.
Now you say that he is engaged through a consultancy(?) is he himself is the consultant? or simply he is sent by the consultant?
He can be excluded from ESI if his remuneration is more than Rs 21000. he can be excluded from PF if his salary is more than Rs 15000. If the salary is not more than 21000, even if he is sent from the consultancy he should be given ESI. Similarly, if his PF qualifying salary (the salary on which your company deduct PF of other employees) is less than Rs 15000, he should be given PF even if he is not under your rolls.
Now, if he has been sent by a consultant, he is a contract worker whose employer is the consultancy company. If that is the case there is no need for him to make a contract with you. It should be with Principal employer, ie, you and the consultancy.
Another possibility is independent contractor. An independent contractor is one who takes up work and does it and returns it. He will not be an employee of you and as such can be excluded from ESI,PF and ultimately gratuity also. But an independent contractor need not take a gap in between.Why should there be a gap? that is not required. Again an independent contractor will not be following the office timing, he will not follow your dress code, he will not be supervised by your people on matters other than quality of the end products delivered or services rendered. He will not follow your leave rules and you cannot take an disciplinary action against him other than termination of the contract.
One important point that I want to make is that before posting,make everything clear. When you post the issues very clearly and transparently, we can advise you properly. I have posted so many things here,mos of these are not related to you.But I was made to post such things because your question was improper. I am not fully convinced about your query or apprehensions because there are still some grey areas. I am sure that the employee is not an independent contractor but is coming to your office in time, following the leave rules, following the instructions of your persons and he is subjected to disciplinary action as per your company polices.