This article is written by Amartya Mukherjee, pursuing an Executive Certificate Course in Introduction to Legal Drafting from LawSikho.
A fixed term employment employee or workmen is a person who has been engaged on the basis of a composed agreement of work for a fixed period. There were no provisions in Labor Laws in India as to fixed term employment but laws related to Fixed term employment is in trend in many European and Latin countries. Therefore, a category has been introduced under Industrial Employment Act (Standing Orders), 1946 which imparts flexibility to a company to hire people in case of Apparel Manufacturing Sector to meet fluctuating demands of the sector due to seasonal nature. The amended Act came into force on 16th March, 2018 which portrays fixed term employment as a completely new concept. The newly amended law will be beneficial to the seasonal manufacturing industries and for skilled employees. This article is analyzing the law which governs fixed term employment contracts in India.
The flourishing industrialization has benefited nations in several ways. Still, simultaneously it has also led to an increase in demand for the set convention that could help in making the work streamlined for both workers and employers. Amidst, there are some industries like leather, textile, food, etc. do not run smoothly because of their nature of business. In this situation, demand may fluctuate because of changes in consumer behavior. In any of the situations, companies look for quality services from their employees for a limited time. They also want to make sure that there is the right supply of order on time and hence they focus on fixed-term employment.
Fixed term employment contracts are contractual agreements between employers and employees defined by a fixed duration on or a pre-decided event to end the contractual agreement between them. Companies can represent special forms of temporary dependent employment as fixed term contracts by channeling by recruiting through private employment agencies on project basis temporary employment. This contract benefits both employers as well as workers. In addition to this, workers are protected under the amended act as it is provided in the statutory benefits [Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018]. These rules specify wage benefits, allowances, working hours, etc. which shall be equal to that of a permanent worker.
Operation of the act and rules before the introduction of the amendment
The Act provides for mandatory certification of Standing Orders by Jurisdictional Labor Commissioner after submission of draft by the employer. These are stated under the schedules of the Act with each set of models standing requests accommodating the classification of workmen. Before the introduction of the amendment related to the Fixed Term employment, this was allowed only in the apparel manufacturing sector. Different areas are not allowed to enlist laborers on a fixed term premise which lead to issues particularly in ventures which are occasional in nature. Under the plan of model standing requests the accessible orders of laborers are:
Fixed term workers always wound up being ordered under brief laborers and in this way they miss out on a few advantages that they would have been qualified for.
Further, fixed term laborers were ineligible for legal advantages that were accessible to perpetual specialists. This was unfair on the part of fixed term workers as they delivered longer times of administration than perpetual laborers yet got not paid in lieu of the same. Some other areas of concern are termination of employment, wages, hours of work, allowances, etc. Fixed term workers are not provided the same working conditions which are provided to permanent workers.
Due to the above grey area, employers began employing fixed term workers which are available at low cost. Thus, they also converted permanent workers into fixed term workers.
Amendments in the Industrial Employment (Standing Orders) Central (Amendments) Rules, 2018 regarding fixed term employment
- The particulars are recorded in Schedule I. One of the important eleven particulars is the classification of the workmen. The amendment enlists another heading, “Fixed term employment” to the classification of workmen.
- Rule 3 (3A) now has a new provision. This rule prevents the employer from converting any of his permanent workmen into fixed term employment. This has been done in order to prevent the management from exploiting the permanent workers.
- Rule 5 has another arrangement (6A) which commands the business to give points of interest for fixed term employment while applying for affirmation of standing requests.
- A new sub passage (h) emphasizes fixed term business laborers as a fixed collaboration dependent on an agreement.
- New sub-passage (h[a]) additionally guarantees that working hours, wages and advantages must not be not as much as what is being given to a lasting laborer.
- New sub passage (h[b]) ensures that fixed term employees will be entitled to statutory benefits.
- New paragraph (13b) states that, no notification of end of the fixed term is needed at the expiry of fixed term.
Benefits of fixed term contract
Fixed term contract offers various different benefits to the employees and employers. Some of them are enumerated below:
As an employer:
- You get a skilled candidate who has expert knowledge for a particular project.
- It’s a great way to increase labor. When there is high demand, employers can put them under probation period and evaluate their work. Once the employer is satisfied, he can transfer the employee to a permanent employment contract.
- In order to make it more alluring, the employer may change the paternity and maternity leaves in this contract.
- The employer can effectively forecast resources and budget.
- Because of the several advantages that fixed term contract offers, the employer can expect higher commitment from the employees.
- Fixed term employment additionally uses the employers to offer fixed employment to their employees.
As an employee:
- If a person is hired as a fixed term employee, he/she enjoys the same benefits and has the same rights as permanent employees. Fixed term employees are entitled to similar leaves, wages and working conditions.
- In some special cases, fixed term employees are paid higher than a permanent employee in view of their uncommon aptitudes that are needed for the sort of job they have been recruited for.
- The company can also extend the fixed term employment to permanent employment on a case to case basis depending upon performance of the employee subjected to the requirements.
What does fixed term employment include?
When it comes to preparing a fixed term contract for an employee, certain conditions will vary from one organization to another. But there are some aspects which remain the same. Below is the list of those pointers that any fixed term employment contract must have:
Details which are mandatory in every contract:
- Name of the business and representative
- Address of the business
- Place of work of a representative
- Date of beginning of work
Pay and Perks:
- Salary or wages
- Overtime (if material)
- Method of installment
- Calculation of wages
- Additional benefits
- Pension conspire
Sort of agreement:
- Duration of fixed term contract
- Prior notice period for end.
- No. of long periods of work every day
- Alternative work routine
- Definition of extra time
- Meal and rest period
- Timekeeping and participation prerequisite
- Annual leave privilege
- Conditions identified with wiped out leave
- Sick leave and other paid leaves
- Details in regards to the disciplinary methods of individual nations
- Condition under which the business can fire the representative
- Employees’ entitlement to association portrayal
Wellbeing and Safety:
- Responsibilities of business and representative
- Details of secrecy arrangement
- Use and abuse of electronic correspondence and the web
- Purpose and definition
- Benefits that representatives will get according to fixed term business contract
Assessment of execution:
- Criteria for assessing execution
- Provision of uniform for workers
- Employee has consented to the pointers referenced previously.
What happens if the fixed term contract comes to an end?
There is a chance that an employer wishes to end the contract early but such conditions must be provided under the contract. In such a case, minimum notice of:
- One week is necessary if the person has worked for a month or more.
- One week for each year if the person has worked for 2 years or more.
- Employers are also liable to comply with the same.
Issues regarding fixed term contract
- The Small and Medium Enterprises may not opt for Fixed term employment as they operate with thin profit margin. Instead they would stick to contract workers to whom they pay less salaries. This is one of the main issues of Fixed term employment as Small and Medium Enterprises form a large crux of the Industry in this nation.
- The free hand is given to the employer for ‘hire and fire’. Because of this, employees will make the unskilled laborers vulnerable to the unethical actions of an unscrupulous employer.
- Fixed term employment is only for Industrial Establishments and Commercial Establishments are not covered.
The changes in the Act which has been mentioned and the important Central and State rules bring a practice that has been in activity for quite a while into the space of guidelines. But as mentioned in the limitation of the newly amended act that these changes would be incorporated only by manufacturing companies. However, not many states, for example, Karnataka and Haryana have expanded the utilization of this order to the shops and foundations through the Payment of Wages Act, 1936 in their particular states. The Draft Code on Social Security, 2019 delivers the issues of equality in receipt of advantages with perpetual workers under the aegis of fixed term business. With these changes brought in two years back, the impact was not felt at a down to earth level as states had not made the applicable corrections to their particular Industrial Employment (Standing Orders) Rules. But this has changed over the last few months as most states are introducing relevant amendments to give effect to this change.
In case of permanent employment, Management has a problem that it does not have a free hand to hire and fire. In case of contractual jobs, the employees have an issue that the pay and working conditions are very poor. The fixed term employment provides a compromise between permanent employment and contract jobs. Because of high demand of skilled and highly skilled workers, they are the ones who are benefited most by Fixed term employment. But this would be unfair on the part of unskilled and semiskilled workers who are vulnerable to unfair practices by the employer. The government should think of them. Fixed term employment would be beneficial for industries who are engaged in project-based assignments. But Medium and Small Enterprises would not prefer Fixed term employment as they operate on a very thin profit margin. They would rather continue with contract workmen for lesser wages. To conclude, if this amendment is implemented by the employer ethically, Fixed term employment will satisfy all the stakeholders and provide competitive advantage.
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