Manager Fin. & Adm.
+1 Other

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Our start-up company currently has all its employees as "Consultants" to the company and their respective salaries are as paid to the Consultants (i.e. TDS @ 10%, and rest is take-home salary).
Now we are transitioning towards being permanent employees and thus now need to follow proper HR Processes, meaning proper Salary Structures, Taxes, Benefits etc...
This process is impacting the take-home salary for everyone. Especially for Sales people whose salary is also being divided as 70:30 (fixed:variable), this has resulted in further reduced take-home.
Thus wanted to know if there was a way to maintain same take-home salary (as that of consultants') ?
Also wanted to know how ethical (or legal) is it to reduce take-home salaries after months of service without any prior intimation what-so-ever?
Would appreciate if someone could throw some light on this issue. Thanks.

From United States , Yonkers
Hi Danny,
The best way to maintain the take home salary is going backwards in calculations. For ex. earlier a person getting 10K and TDS 9K
try to start the calculation with 9k.
If your company is providing the PF then the calculation will be
9k+PT+PF+Deduction = Gross.

From India , Bangalore
In the first place why did you shift the consultant to employees.
Having done that you have to comply with employee statutory requirement.
If you want the employee to get the benefit you should do the reverse working as suggested earlier which will increase the CTC.

From India ,
Dear Dany,
This is the concern of most of start up companies into IT.
The move is positive considering your exposure to statutory compliances.
I have a practical suggestion for you. Structure the components of Fixed components in such a way that recoveries are less. Cant do much about variable components.
It is not unfair practice to have restructure. You want to comply the prevailing labour laws.
You should convence them the impact of such changes.
You will have more negative impact if you dont effect the transition now.
For further discussion, you may contact me on .

From India , Bangalore
Vish, Can you pls. elaborate on the negative impact. And why should one change from consultant to employee.
From India ,
Hi Danny,
Salary Income is covered under the section-192 of the Income Tax.
Whereas Consultant's income is covered under Section-194 of the Income Tax.
You can refer the two sections to understand the difference.
If your company considers your employees as Consultants and deducting tax accordingly it is incorrect in the eyes of law. Are they not giving provident fund other such statutary benefits? If they are treated as consultants, it is such a situation, at any point of time they may send their employees (Consultants) out and from employees point of there is no social security. However, they can file a civil suit as per law of contract for breach of any condition.
See the actual situation who is having upper hand!

From India , New Delhi
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