Contractor vs Employee Classifier
Assess misclassification risk: TDS, PF, ESI, and labour law exposure
How it works
The eight factors cover control, tools, substitution, risk, integration, continuity, benefits, and pay structure. The result is a screening signal, not a legal determination.
FAQs
What does the eight-factor test assess?
Control and supervision; Tools and equipment; Right to substitute; Financial risk; Integration into business; Continuity and exclusivity; Benefits and perquisites; Fixed pay structure
When does PF exposure arise?
Employer with 20 or more employees (including contract workers through contractor as employer) — EPF Act applies Basic + DA ≤ ₹15,000/month — mandatory PF contribution
When does ESI exposure arise?
Employer with 10 or more employees — ESI Act applies (factories: 10; establishments: 10; varies by state and industry notification) Gross wages ≤ ₹21,000/month (₹25,000 for workers with disability)
Which TDS section applies to salary?
Employer deducts TDS at slab rates on salary — no minimum threshold; tax deducted on estimated annual income
What is the main risk?
PF and ESI arrears (employer + employee contribution + damages 5–25% + interest 12% p.a.) for up to 5 years Salary TDS shortfall — company liable for s.201 interest + penalty for non-deduction Disallowance of contractor payment u/s 40(a)(ia) if TDS not deducted on what is actually salary Bonus Act exposure if contractor treated as employee (min 8.33% bonus for eligible employees) Gratuity Act exposure after 5 years of continuous service
Hub Guide · TDS Compliance
Go deeper — the TDS Compliance hub
The s.192 salary vs s.194C contractor split this classifier tests is exactly where TDS rates get misapplied — and misapplication attracts s.201 interest plus s.234E ₹200/day late fees. The hub maps the 194 series, 24Q/26Q returns, and TRACES corrections.
Open the hub guide