Employment Under Retainership and CLRA - 1970
Does employment under retainership (a contract between an individual or agency and an organization for the purpose of specialized services) attract CLRA - 1970?
If yes, how?
If no, what are the liabilities of the employer in the case of such employment?
Any inputs will be highly appreciated.
Regards,
Mahesh
From India, Mangaluru
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1Does employment under retainership (a contract between an individual or agency and an organization for the purpose of specialized services) attract CLRA - 1970?
If yes, how?
If no, what are the liabilities of the employer in the case of such employment?
Any inputs will be highly appreciated.
Regards,
Mahesh
From India, Mangaluru
Acknowledge(0)Amend(0)
No, it does not apply to retainership since it is a contract between the company and the retainer for allowing his special services to the company for a fee. The liabilities of the company depend upon the terms of the contract.
Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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Who is a Retainer?
A retainer is a professional adviser, such as an attorney, counselor, or consultant, who works independently and provides services to more than one organization at a time. For example, a person with a degree in law can be retained as a legal consultant/advisor, a Chartered Accountant (CA) can be retained as a financial consultant, or a person with a degree like MBBS/MD can be a retainer medical practitioner in an establishment or factory.
While engaging any retainer, it must be kept in mind that retainers are hired for specific consultancy services that require professional knowledge and experience. It is also important to ensure that the retainer possesses the requisite professional qualifications. Retainers are not full-time employees of any organization. In the case of retainers, service tax will be applicable, and employment/labor laws will not apply to retainers who provide need-based services and fall outside the coverage of ESIC and PF. Retainers are paid for the services they render to the organization.
Implications of Designating Full-Time Employees as Retainers
If a person working on the payroll of an organization is given the designation of a retainer, even for a short term, and a proper appointment letter is issued instead of a retainership agreement, and if they follow the instructions from the employer, with their work being supervised and controlled by the employer, and attendance and salary records maintained, then an employer-employee relationship exists between the organization and the persons working as retainers. Legally, they cannot be treated as retainers, and only service tax is payable against the services rendered by them. Otherwise, payments made to retainers would qualify for deduction of ESI/PF and other statutory levies as they would be deemed employees, not retainers. They shall be treated as full-time employees of the organization for the purpose of labor and employment laws. This designation is often used to avoid compliance with labor laws and to provide social benefits to employees. The organization will be bound to comply with labor laws related to an employee's PF, gratuity, and other terminal benefits on retirement or resignation.
Risks Involved in Such Designation
The company is obtaining services not as a retainer, as the definition of a retainer is self-explanatory, and pays service tax to the tax department. However, such employees will be treated as full-time employees of the company under applicable labor/employment legislation, as most employment legislation defines any person employed in any industry to do any manual, unskilled, technical, operational, clerical, or supervisory work for hire or reward, whether the terms of employment are expressed or implied. Further, the EPF & MP Act and ESI Act provide a wide definition of an employee, covering all employees working or receiving remuneration directly or indirectly from the employer.
In case of inspection from ESI/PF authorities or the labor department, it could result in significant losses to the organization in terms of damages and interest on contributions that need to be filed under social benefit legislations like ESI, PF, LWF, etc. Apparently, the organization has to pay double: one towards the service tax and for compliance with social benefit legislations.
Regards
From India, Delhi
Acknowledge(0)Amend(0)
A retainer is a professional adviser, such as an attorney, counselor, or consultant, who works independently and provides services to more than one organization at a time. For example, a person with a degree in law can be retained as a legal consultant/advisor, a Chartered Accountant (CA) can be retained as a financial consultant, or a person with a degree like MBBS/MD can be a retainer medical practitioner in an establishment or factory.
While engaging any retainer, it must be kept in mind that retainers are hired for specific consultancy services that require professional knowledge and experience. It is also important to ensure that the retainer possesses the requisite professional qualifications. Retainers are not full-time employees of any organization. In the case of retainers, service tax will be applicable, and employment/labor laws will not apply to retainers who provide need-based services and fall outside the coverage of ESIC and PF. Retainers are paid for the services they render to the organization.
Implications of Designating Full-Time Employees as Retainers
If a person working on the payroll of an organization is given the designation of a retainer, even for a short term, and a proper appointment letter is issued instead of a retainership agreement, and if they follow the instructions from the employer, with their work being supervised and controlled by the employer, and attendance and salary records maintained, then an employer-employee relationship exists between the organization and the persons working as retainers. Legally, they cannot be treated as retainers, and only service tax is payable against the services rendered by them. Otherwise, payments made to retainers would qualify for deduction of ESI/PF and other statutory levies as they would be deemed employees, not retainers. They shall be treated as full-time employees of the organization for the purpose of labor and employment laws. This designation is often used to avoid compliance with labor laws and to provide social benefits to employees. The organization will be bound to comply with labor laws related to an employee's PF, gratuity, and other terminal benefits on retirement or resignation.
Risks Involved in Such Designation
The company is obtaining services not as a retainer, as the definition of a retainer is self-explanatory, and pays service tax to the tax department. However, such employees will be treated as full-time employees of the company under applicable labor/employment legislation, as most employment legislation defines any person employed in any industry to do any manual, unskilled, technical, operational, clerical, or supervisory work for hire or reward, whether the terms of employment are expressed or implied. Further, the EPF & MP Act and ESI Act provide a wide definition of an employee, covering all employees working or receiving remuneration directly or indirectly from the employer.
In case of inspection from ESI/PF authorities or the labor department, it could result in significant losses to the organization in terms of damages and interest on contributions that need to be filed under social benefit legislations like ESI, PF, LWF, etc. Apparently, the organization has to pay double: one towards the service tax and for compliance with social benefit legislations.
Regards
From India, Delhi
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