5. Implications of Classification of Independent Contractors as Direct Employees

In the event an independent contractor engaged by a company is classified as an employee of the company, it would generally have the following implications for the company under Indian employment laws:

1. The company would be required to undertake social security contributions (prospectively or retrospectively from the date the independent contractor was engaged) and also undertake all corresponding compliances in this regard.
2. The implications and compliances for the company would be far greater and cumbersome if the individual qualifies a workmen employee under the Indian laws. In such a case, the individual will be guarded by additional Indian labour laws with respect to their termination of services. Further, the company would also need to comply with applicable labour laws and pay the necessary statutory compensation to the individual upon their termination of services.