Are Retainers Considered Employees and Do They Qualify for PF Coverage? Let's Discuss!

We are employing certain individuals who are being paid on a lump-sum basis every month. Those who are registered with GST (outgoing above 2 lakhs per month), we are paying with GST against their claim, saying they are rendering advisory services. For others, the lump-sum amount (below 2 lakhs per month) is paid without any claim/invoice raised by them.

Classification and PF Coverage

1. Are they classified as employees, and are they covered under PF?

Payment Against Claim/Invoice

2. Is it necessary to effect lump-sum payment only against a claim/invoice, even if they are not covered under GST?

Age Criteria for Retainership

3. Is there any age criteria to employ individuals on a retainership basis?

Regards

Dear friend,

"Retainership" is a contract for service between an employer and an independent person with special knowledge and experience in any particular subject or field of activity related to the organization of the employer. The purpose is to tender appropriate advice on complex issues as and when required.

Therefore, it is a contract for service entered into between the employer and the person retained as an advisor. As such, he is not an employee of any sort in the employer's organization and is free to render such service to as many organizations as he prefers, subject to the conditions of confidentiality and timely compliance.

The compensation paid to him, generally in advance, is only a fee charged for the services to be rendered. Hence, it is not 'salary' as paid to an employee. The retainer fee is subject to income tax deduction on a TDS basis and Service Tax, depending on his total turnover. Therefore, no labor laws pertaining to the establishment of the employer, including the EPF Act, would be applicable to a retainer.

No age criterion is applicable to a retainer.

Invoice Submission and GST Compliance

The concerned employee should submit an invoice with GST. The employer will deduct TDS as applicable and pay the employee. The employee, in turn, will pay GST to the authority. In the absence of any valid invoice, it may appear as an improper arrangement, and many complications will arise in the future.

Regards, S K Bandyopadhyay

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