How to Transition a Retiring Employee to a Consultant Role: Seeking Advice and Draft Letter

Dear HR Professionals,

I have one query. One of my employees is retiring from his service tomorrow, i.e., dated 06/10/2023, as per the retirement policy of our company. We want to retain him as a consultant by paying a professional fee. Kindly advise on the steps to follow and provide me with a draft letter for the same. I am waiting for your prompt response.

Thanks & Regards,
Sanjay

I hope you can refer to this for the above query: https://www.citehr.com/641492-retire...ent-india.html

As pointed out by Ms. Lakshmi Priya, the matter was discussed earlier also. Therefore, you can go through the link provided.

To add further, I would like to say that a consultant is a person who can be consulted for advice and guidance. If he is paid professional fees, he should be treated as a professional. As such, he should not be asked to come to your office every day at 9 am or at the scheduled time when other employees report, remain there for 8 hours, from Monday to Friday or Saturday. He should not be asked to fill out a leave form whenever he has to take a leave. He should not be asked to follow HR protocols anyway.

Still, do you want to appoint him as a 'consultant' paying a 'professional fee' rather than employing him as an employee and paying a salary?

The retired employee can be taken on a retainership agreement for a fixed period of time instead of being hired as a consultant.

Retainership vs. Consultancy

Both are the same, whether it is retainership or consultancy. There will not exist any employee-employer relationship, and as such, you cannot make him liable to the policies and rules of the company applicable to other employees. If you make these 'consultants' or 'retainers' also follow the rules, then they will be treated as employees, and all statutory dues applicable to other employees, including gratuity subject to qualifying service, will have to be paid to them as well.

Fixed-term Contract Option

On the other hand, you can very well appoint them as employees on a fixed-term contract, say for one year. But still, for that year, he should be paid ESI (if the salary/remuneration is not more than Rs 21,000), Bonus, and leave benefits. After all, how much will it cost the company? If not covered by ESI, then what will be the medical and other compensation if something happens to the employee? It will be a huge amount.

Moreover, you are giving him another term after his lengthy and meritorious service. No employer would give a bad employee an opportunity to work for an extended period after his superannuation. Only good employees who were loyal to the organization would be given an extension. Then why should he be kept away from at least statutory contributions?