Different types of employment contracts in practice
There are three main types of contracts, though employment terms can vary according to designation and industry.
An employment agreement is the key document on which the employee-employer relation is based. It is an agreement for exchange of service and remuneration over a period. It contains all key terms and conditions relating to the work - be it compensation, designation, place of work, list of benefits during employment, working hours and restraint on trade (if any).
So, all employees must sign this document. However, it may take different shapes depending on certain clauses that may be exclusive to a particular employee. Here are three broad categories.
Q. Is there an upper limit for the duration of employment on a fixed-term contract?
A. There is no such upper limit but as per a Supreme Court directive, it is advisable to keep it within eight years. There is also no law capping the times a contract can be renewed, but, again, it is advisable to not do so beyond two times.
OPEN-ENDED APPOINTMENT LETTER
Benefits:
Includes all statutory benefits due to a salaried employee (provident fund, bonus, gratuity, etc)
Nature of taxation:
Tax deducted at source (TDS) under Section 192 of the Income Tax Act as Income from Salary
Impact of taxation:
Up to 30% of taxable income
Deductions:
On account of PF, employee insurance, et al
Applicability:
Applicable to regular salaried employees
How it affects employers:
Provides competency and contribution of a set of employees for a long duration, aids stability
How it affects employees:
It provides security and also a platform to grow and learn over an extended period
FIXED-TERM APPOINTMENT LETTER
Benefits:
Includes all statutory benefits due to a salaried employee (provident fund, bonus, gratuity, etc)
Nature of taxation:
TDS under Section 192 of the Income Tax Act as Income from Salary
Impact of taxation:
Up to 30% of taxable income
Deductions:
On account of PF, insurance, labour welfare fund, et al
Applicability:
Applicable to regular salaried employees
How it affects employers:
Provides additional support for a limited period or to meet peak demand, allows flexibility
How it affects employees:
For market entrants, it is the first step towards a permanent job
CONSULTANT
Benefits:
No additional benefits; it is not a statutory requirement
Nature of taxation:
TDS under Section 194J of the Income Tax Act as Income from Profession
Impact of taxation:
TDS of 10.34% of the fee, apart from the service tax paid directly
Deductions:
TDS deducted from consolidated fee
Applicability:
Hired for a specific specialised skill or knowledge
How it affects employers:
Provides support and expertise needed in areas that the company may not have expertise in
How it affects employees:
Helps run a professional business independently.
-By TeamLease Services
So, all employees must sign this document. However, it may take different shapes depending on certain clauses that may be exclusive to a particular employee. Here are three broad categories.
Q. Is there an upper limit for the duration of employment on a fixed-term contract?
A. There is no such upper limit but as per a Supreme Court directive, it is advisable to keep it within eight years. There is also no law capping the times a contract can be renewed, but, again, it is advisable to not do so beyond two times.
OPEN-ENDED APPOINTMENT LETTER
Benefits:
Includes all statutory benefits due to a salaried employee (provident fund, bonus, gratuity, etc)
Nature of taxation:
Tax deducted at source (TDS) under Section 192 of the Income Tax Act as Income from Salary
Impact of taxation:
Up to 30% of taxable income
Deductions:
On account of PF, employee insurance, et al
Applicability:
Applicable to regular salaried employees
How it affects employers:
Provides competency and contribution of a set of employees for a long duration, aids stability
How it affects employees:
It provides security and also a platform to grow and learn over an extended period
FIXED-TERM APPOINTMENT LETTER
Benefits:
Includes all statutory benefits due to a salaried employee (provident fund, bonus, gratuity, etc)
Nature of taxation:
TDS under Section 192 of the Income Tax Act as Income from Salary
Impact of taxation:
Up to 30% of taxable income
Deductions:
On account of PF, insurance, labour welfare fund, et al
Applicability:
Applicable to regular salaried employees
How it affects employers:
Provides additional support for a limited period or to meet peak demand, allows flexibility
How it affects employees:
For market entrants, it is the first step towards a permanent job
CONSULTANT
Benefits:
No additional benefits; it is not a statutory requirement
Nature of taxation:
TDS under Section 194J of the Income Tax Act as Income from Profession
Impact of taxation:
TDS of 10.34% of the fee, apart from the service tax paid directly
Deductions:
TDS deducted from consolidated fee
Applicability:
Hired for a specific specialised skill or knowledge
How it affects employers:
Provides support and expertise needed in areas that the company may not have expertise in
How it affects employees:
Helps run a professional business independently.
-By TeamLease Services
