ASB Guidance on Implementing
AS 15, Employee Benefits (revised 2005)
This Guidance on Implementing Accounting Standard (AS) 15, Employee Benefits
(revised 2005), issued by the Accounting Standards Board of the Institute of Chartered
Accountants of India, does not form part of the Standard. The purpose of this
Guidance is to illustrate and to assist in clarifying the application of the Standard.
1. What are the kinds of employees covered in the revised AS 15 and whether a
formal employer-employee relationship is necessary or not, for benefits to be
covered under the Standard?
The Standard does not define the term “employee”. Paragraph 6 of the Standard
states that ‘an employee may provide services to an enterprise on a full
permanent, casual or temporary basis and the term would also include the
whole-time directors and other management personnel. The Standard is applicable
to all forms of employer-employee relationships. There is no requirement for a
formal employer-employee relationship. Several factors need to be considered to
determine the nature of relationship.
Generally ‘outsourcing contracts’ may not meet the definition of employer
relationship. However, such contracts need to be carefully examined to
distinguish between a “contract of service” and a “contract for services”. A
‘contract for services’ implies a contract for rendering services, e.g., professional
or technical services which is subject to limited direction and control whereas a
‘contract of service’ impl
ies a relationship of an employer and employee and the
person is obliged to obey orders in the work to be performed and as to its mode
and manner of performance.