Lesson content
Scroll through numbered sections or jump via the outline.
What you'll take away
- Employee: control over how/when/where work is done, part of organisation, PF/TDS 192.
Legal difference
Employee: control over how/when/where work is done, part of organisation, PF/TDS 192.
Consultant: independent service contract, TDS 194J/194C, no PF unless misclassified.
Law looks at substance, not invoice title.
When consultant makes sense
Short projects, specialised skills, part-time fractional CXO.
Clear deliverables, own tools, no exclusivity (unless negotiated).
GST-registered consultant invoices with GST if registered.
When employee is required
Full-time core team, reports to founder, uses company email and systems daily.
Trying to save 12% PF by calling engineers 'consultants' is a due diligence red flag.
Contract essentials
Scope, IP assignment, confidentiality, payment terms, termination, non-solicit (reasonable).
MSA + SOW for consultants; appointment letter + policies for employees.
Audit readiness
Labour inspector or investor DD will sample contracts — keep consistent classification.