There were a lot of discussions that happened about the continuance of service after retirement. Many support the system of offering "retainership," and many do not support the same. I do not support the system of offering retainership to an "employee" because both are different. Offering or engaging a person as a retainer should have an objective. It can involve getting some professional service or getting some routine skilled, manual, or clerical work done. You can offer retainership to a professional person from whom you would like to get advice as and when required, but you cannot offer it to a lower-level executive or a workman who is expected to come to the office/plant every day and spend usual working hours like other employees. The former will not come to your office regularly and remain in the office from 9 am to 5 pm from Monday to Friday/Saturday but will be available on call whenever his help is required. Even if he is not contacted or his service is not availed in a month, he would be paid his fees, viz, retainer fees which is a professional fee. That is a professional charge different from salary for all purposes, including income tax.
On the other hand, if you want the (retired) person to come to the office every day, do the work assigned, take permission to avail leave, and follow the HR protocols in all respects, then the remuneration paid shall only be regarded as Salary. If his remuneration/salary is below Rs 21,000, ESI should be deducted and contributed. If he is not a PF pensioner, PF should also be deducted and contributed. He should be paid a bonus. If he continues for another five years like this, he will be entitled to get gratuity for that period. That means there is no difference between a regular employee and an employee engaged after his retirement. Certainly, if his salary is subject to Income tax, tax should be deducted as per section 192 and not 194J, which is for professional charges.
If you intend to get the service like an employee, you have two choices. The first is to extend his retirement for one or two years with the same service conditions. In such cases, the gratuity will not be settled now but will have to be settled when his actual retirement takes place after one or two years, as the case may be, at the salary he will draw then. Obviously, the cost to the company would be higher then because after two years the salary would be higher, and he would add one/two years of service also.
The second option available is to pay the gratuity and other settlement amount now and offer a fresh employment for one or two years. This will be a fixed-term employment. This also being an employment, you have to consider him for ESI and Bonus if his salary falls within the ESI and bonus brackets. He will be entitled to all leaves that will accrue in due course, but there would not be any carry forward of leaves as the same would have been settled (encashed) at the time of retirement. If this is okay, you can use the same template which is used for other employees on Fixed-Term Contract.
Please confirm your requirement.