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Viraj (Assistant Project Manager)     31 December 2018

Pf and graduity eligibility for working under a consultancy

Hi All,

I am a software project manager and have recently joined a company.

The business model of the company is, they are doing the work for one of their clients in US. US company wires the money to this indian unit. There are over 60 people working in this unit and the unit is registered in India. These people do get salary on time as well as bonus.

This unit calls it a 'consultancy' and they do not deduct the PF. When i joined the company, i was offered some salary which i accepted. When i talked to HR further, he told that this unit is identified as a consultancy and therefore it will never be paying graduity.

Soi, here are my questions:
1. by the setup, it still looks like this unit is a company rather than a consultancy. However, how can one verify this ? This unit has an EIN number. The director of this comapny is Chartered Accountant himself.

2. They gave me offer letter and employiement letter but none of those mention that PF will not be deducted. HR says graduity will also not be deducted. The "employee" will get onlyl CTC. So, if it turns out that this unit is really a consultancy, according to laws, does it requrie to pay PF and graduity ?

3. At the time of paying bonus, they say that the person must sign a letter that he shall not leave the company for a certain amount of time once s/he receives the bonus. If they leave, they will have to payback this unit the whole bonus money. Is this legal ?

4. The HR also said that this unit is identified as consulting comapny and according to laws, consulting company pays TDS to government of india 10% and then they do not have to pay anything more. Also, as they are identified as consultant, they are not liable to pay any graduity to the people working there.,

This unit is functioning since last 10 years and the owner is a well known chartered accountant so my gut feeling is that, he must be aware of all the laws. Still, observing the above i want to understand how things work.


 2 Replies

NRK MURTHY (Manager)     01 January 2019

Dear Sir,


First company registred under companies act please check. when the company crossed 20 or more people PF act attracts.

Bonus: Company will give the bonus after completion 6 years infancy period.

Gratuity : who completed 5 years service they are eligible for gratuity.

The above said grounds he is not following we can fille case aginst him. when ever any filie the case please check the local condition.



P. Venu (Advocate)     01 January 2019

The real question is - whether the nature of work performed is that of employees or consultant? 

Perhaps, you could get better suggestions from

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