Fixed Term Employment Contracts In India

March 20, 2019

Image source: https://bit.ly/2uhX7Qy

This article is written by Asgar Ali, Deputy Manager, Safety and Training deptt., M/s ISGEC Heavy Engg. Ltd Yamunanagar, Haryana, pursuing Diploma in Industrial and Labour Laws by Lawsikho as part of his coursework. Here, he discusses the Fixed-term employment contract.


In October 2016, the NDA Government allowed fixed-term contracts in cloth textile sector and afterwards, in the year 2017, the government allowed the same in leather footwear sector under MAKE IN INDIA Campaign as well as National Skill Development Mission. In the Year 2018, the government proposed to allow fixed-term employment in all sectors by proposing amendments in Industrial Employment (Standing Orders) Central Rules mandating that fixed term contract workmen shall get same wage rate, allowances, working hours and all other benefits likewise to permanent workmen in any Industry.

Now, For Employers, such types of contracts become easier due to relaxation from various compliances under contract labour laws.

The fixed Term Employment contract shall be beneficial for some workers in Information technology Sectors, Manufacturing sectors, Textile Industries, Automobiles sectors where their skill sets are quite high but available for limited duration due to sudden high / sudden less demand in the market. But there are always high probabilities of job insecurities due to the written agreement of employment for a fixed period

Benefits to workers employed under fixed-term employment contracts

The workers hired for a limited period i.e. for a fixed duration under fixed-term employment contracts shall be beneficial to them as compared to contract workers. He shall be eligible for getting all benefits which are available for any permanent workman for the same work content. There are some long term benefits available to a fixed term employee because the statutory benefits entitled are the same to both natures of employment.

Why fixed-term employment contracts required in the present situation?

Some industrial sectors like leather industries, textile market, food industries etc do not run smoothly throughout the years due to its nature of works and most significantly as per the need of consumers. Sometimes the demands go downwards due to no interest of consumers into the product supplied due to outdated fashion, sometimes due to no market demand but sometimes its demand goes quite high due to the sudden change in consumer behaviour for its need. In such situations, the employers look forward to get quality services from talented workforce within such short duration when the demand of their goods are high and in order to supply the on-time delivery, they give preference to fixed-term employment contracts because in such cases, there is No loss to employer and also there is no loss to the fixed term employees. If we look into the protection of workers by means of  statutory benefits then also it is provided under the Industrial Employment (Standing Orders) Central ( Amendment ) Rules, 2018 that:

Can any employer convert his existing employee into a fixed term employee?

In Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, Rule 3 A states that “ No employer shall convert the posts of permanent workmen existing to his industrial establishment “

For fixed term employee, there is no need to serve the termination notice or to pay in lieu of termination of services as it is a fixed term employment contract and such contracts can be renewed and extended by the employer based upon his business needs, but in case it is not renewed , the contract shall be understood as terminated

Power of government to prohibit employment of contract labour in any establishment

There is a provision in Contract Labour (Regulation and Abolition) Act, 1970 that the appropriate government holds the power to prohibit employment of contract labour in any establishment. Sometimes, contract labour can be hired in some establishments as well as some industries due to the pressure of trade unions as well as binding of government over industries to not to hire labour on a contractual basis. In such cases, the government evaluate the work and decides whether it is essential or not necessary, whether the full-time employees are required for such work or not.

Fixed-term employment contracts are like a facility provided to employers in seasonal sectors where demand, as well as supply, fluctuate as per the market situation and in such cases, the facility of fixed-term employment is far beneficial in comparison of contractual based employees or a badli worker. According to the Model Standing Orders given in the Industrial Employment (Standing Orders) Act, Badli worker is one who is appointed for the time being to do some work of regular nature when the person who has been doing that work goes on leave or is absent due to any reason. The job will cease to exist when the regular employee for whose absence he is appointed resumes duty. Since there is no major constraint to comply statutory requirement in case of fixed-term employment contract so in the present situation the employers prefer to opt for fixed-term employment contracts

After the demands of various trade unions the government ordered through a notification that No employer of any establishment or of any industry shall try to convert the posts of existing permanent workmen employed in that establishment  or industry on the date of commencement of Industrial Employment (Standing Orders) Central (Amendment Rules, 2018 as fixed-term employment thereafter

Difference between a contractual labourer and a Fixed Term Employee

There are some basic differences between the services of a contractual labourer and a Fixed Term Employee. The major difference is that employment contracts do not have an expiration date as they are continuous and can be ended by giving a notice which can be with reason and sometimes there may not be any reason. Sometimes under the employment contracts, any disciplinary action can be taken against any contract employee due to the breach of work-related rules. In such situations, if the contractor workmen have to be stopped from work and employer want to let him go then the employer has to pay him in the form of retrenchment compensation which can range from 01 months’ up to 3 months’ remuneration which depends upon the scale, size, and nature of Industry. Also, in some cases it is quite difficult to lay off the workmen without getting the permission of appropriate government as per applicable labour laws as under the act of Industrial Disputes act, 1947

On the other hand, the Fixed-term employment contract is comparatively easier as no such legal bindings are compulsory upon employers. As the fixed-term employment refers to fixed time period employment so it is economical, industry-friendly and more importantly, it is suitable to seasonal nature of work.

Which is best – a contractual labourer and a Fixed Term Employee?

There are several types of employment in today’s Market i.e. Full time, Part time, Freelancer, fixed term, permanent, casual etc and all these types have specific advantages, benefits and sometimes disadvantages or fewer benefits. The benefits or growth in employment types depends on many industrial and business factors, which affect the survival, profit, growth, stability, and goodwill of the organization. There are some HR Policies in many organizations which defines the value of different employment types and which are specifically needed for the smooth running of any business unit. The labour issues are more nowadays and the labour unions are more sensitive, Sometimes the move of associated labour union can affect the business growth of any industrial unit because when the Human resource of any organization is not in the suitability of any business Unit then all other resources shall be going wasted. It is the Human Resource which is most important resource for the survival and growth of a business unit and that’ why there are the strategies of HR department that what type of employment shall be beneficial for the growth of organization and on the other side, what benefits especially statutory benefits shall be given to people engaged to that establishment as per applicable rules. In today’s scenario the Fixed-term employment can be said as best keeping in view following positive aspects :

  1. The employer can complete the short term targets due to easy availability of Fixed-term employees. On the other hand, the talent retains due to short term/fixed-term employment as per the need of time
  2. The budget planning, Resource planning, on-time delivery of goods and delivery can be easy
  3. The fixed term employees can be able to present good quality result due to the freedom of work have been given by the employer as per contract agreement. Thus it helps to make a quality image of fixed-term employees in the eyes of the employer and further business can be given to that fixed-term employees

It is  beneficial both to the employer as well as to Fixed-term Employee

But if we see the dark sides of Fixed-term employment then following are the drawbacks:

  1. The recruitment  of Right employees for the right job at right salary become very difficult because in such case where the culture of fixed-term employment prevails the Human resource especially recruitment efforts becomes time-consuming and employee  retention becomes a big challenge for the industries/establishments
  2. A permanent contract does not end by its own and in case the employer wants to change the working staff as the fixed-term employee, it becomes very expensive and can affect the business growth
  3. Though Fixed-term employment provides flexibility for employing workmen sometimes it may not in the benefit of the organization as per market situation

    Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

Exit mobile version