Fixed-Term Employment Contract

What is a Fixed-term Contract?

The growth of industrialisation has benefited nations in different ways. Still, at the same time, it has also led to a rise in the demand for a set protocol that could help make the work streamlined for both the workers and the employers.

Amongst the different types of industries in India, some sectors, like leather, textile, food, etc., do not run smoothly throughout the year because of their nature of work. In such cases, the demand may decrease because of changes in consumer behaviour, and sometimes the demand may be on the higher side.

In either of the situations, employers look for quality services from their workforce for a limited time. They also want to ensure that there is the right supply of orders on time, and hence they emphasise fixed-term employment.

The fixed-term employment agreement benefits both the employees and employers. Besides, workers are also protected as they are provided statutory benefits that fall under the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018.

The latter includes that wage benefits, allowances, working hours, etc., shall equal that of a permanent worker. All these benefits are equivalent to the worker's service period. These conditions are mentioned in fixed-term contracts that we will discuss later in the blog.

Overview of Fixed-term Contract

The Fixed term contract law is quite prevalent in the industry today. It is important to understand how it came into existence. It is like a contractual relationship between the employer and the employee that is defined for a certain period.

The labour laws of the nation govern these contracts. This objective is to ensure that the employer doesn't follow unjust practices like non-payment of wages, unjust dismissal, etc. One of the drawbacks of fixed-term contracts is job insecurity. There is a clear difference between fixed-term and long-term contracts in nations with strict labour laws.

As mentioned above, in some cases, fixed-term contracts lead to permanent contracts. Take the United Kingdom, for example; in the UK, any employee who is on a fixed-term contract for more than four years will automatically become a permanent employee.

Fixed-Term Contract Benefits

Here are a few benefits that a fixed-term contract offer to employees and employers.

• It's a great way to increase labour when there is a greater demand by putting them under probation and evaluating their work. Once satisfied, you can transfer them to a permanent employment contract
• You can convert paternity and maternity leaves under this, thus making fixed-term contracts more alluring to employees
• It is easy to effectively forecast resources and budget
• You can expect a higher commitment from the employees because of the several advantages that fixed-term contracts have to offer
• Fixed-term employment also leverages the employers to offer permanent employment to their employees.

• If someone gets hired as a fixed-term employee, then they enjoy the same rights as permanent employees. They are entitled to similar wages, leaves, and working conditions. Benefits like the package, protection against unfair dismissal, and equal pay subjected to permanent employees also rendered to the fixed-term employee
• In certain cases, fixed-term employees are paid more than their permanent staff because of their special skill that is required for the kind of role they are hired
• There is also a greater probability of extending the fixed-term employment to permanent contracts based on your performance and requirement of the company. The fixed-term employment agreement benefits both the employees and employers.

What Does a Fixed-Term Employment Contract Include?

Here we list out the checklist that any fixed-term employment contract must have:

• Name of the employer and the employee
• Address of the employer
• Place of work of an employee
• Designation or title of the job along with job description
• Date of start of employment

• Salary or wages
• Overtime (if the applicable)
• any other kind of payment which the employee is eligible for
• Method of payment and calculation of wages
• Additional benefits
• Pension scheme

• Type- Fixed
• Duration of a fixed-term contract
• Notice period in case the employee is terminated

• Number of hours of work per day
• Alternative work schedule
• Definition of overtime
• Staffing
• Meal and rest period
• Timekeeping and attendance requirements

• Annual leave entitlement
• Conditions related to taking leave
• Sick leave and other paid leaves

• Details of disciplinary procedures followed in the country
• Conditions under which the employer can terminate an employee

• Definition
• Employees' right to union representation.
• Fixed term employment contract contains the explanation of each step of the grievance procedure

• Responsibilities of employee and employer

• Details of a confidentiality agreement
• Use and misuse of electronic communication and the internet.

• Purpose and definition
• Benefits that employees will get as per the fixed term employment contract.

• Criteria for evaluating performance

• This part of the contract mentioned about the retirement policy followed by the employer

• Provision of uniform for employees

• The employee agrees to the pointers mentioned above and other conditions specified by the employee. Make sure that you read the terms and conditions of the contract thoroughly.

What happens when a Fixed-term contract comes to an end?

In case the fixed-term contract comes to an end, then the following can happen:

There is a probability that an employer may wish to end the contract early, but this condition must be mentioned in the contract, in such a case, a minimum notice of:

• One week is must if the employee has worked for a month or more with the employer
• One week for each year, if the employee has worked for more than 2 years with the employer
• The same is applicable for the employers as they need to provide a minimum of one week's notice if the employee has worked for at least a month

All this information must be mentioned in the contracts. Hence, it becomes imperative that both employee and employer read the contract thoroughly before accepting it.

What needs to be done in case of Fixed-term employment comes to an end?

If an employee continues to work before the end date of the fixed-term contract without renewal, the implied agreement applied to extend the fixed term. If the employee continues to work for four years, then the fixed-term employee is automatically converted into a permanent employee and is subjected to all the benefits of permanent employees.

There is a probability that the employer may dismiss the employee without proper reason. Also, if the contract is not renewed on time, then it is considered as dismissal. If the fixed-term contract lasts for at least 2 years, the employer needs to give a fair reason for the same.

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Well, as mentioned that fixed-term contracts are for a definite period of time, but in certain cases, the employer may wish to extend the contract. In such cases, they can work upon renewing the fixed-term contracts. Here are certain things that you need to remember:

• Usually, a fixed-term contract comes to an end when the date mentioned in the contract is reached. The employer doesn't always have to mention the notice. But, this may be counted as a dismissal procedure.
• After the fixed term employee has completed two years of service with the company, the employer cannot unfairly dismiss the employee. The employee is entitled to receive a written statement or reason for dismissal. In case the reason for dismissal is redundant, and the employee has completed two years of continuous service with the organization, then he qualifies for statutory redundancy payment similar to a permanent employee.
• In case the employer ends the contract earlier, and you have the right to a notice period. Remember, this depends on what you contract mention, for example, the employer will mention the notice period, like a week or a month (it is one week for each year that you have worked and if you worked continuously for two years or more).
• In case you have exceeded the fixed-term contract, and your agreement has not yet been renewed, then there can be implied agreement. The employer has to give the notice period.
• There is a probability of a fixed-term contract to become permanent. If your fixed-term contract is for four years or more, then it becomes a permanent one unless the employer shows good enough reason for it not to happen.
• One needs to give notice if he wants to end his job. If you are on a fixed-term contract and decide to end it before the date mentioned in the contact, then you must hand the notice of at least a week in advance, this happens in case you have worked with an employer for a month.

This information explains in detail about fixed-term contracts. Indian companies are now following this contract, thus ensuring equal wages and rights to the employees.

FAQs on Fixed-Term Employment Contract

Why Vakilsearch?

Vakilsearch’s experienced legal experts can draft you a fixed-term employment contract that can be customised as per your needs. We can draft the contract for both big firms and for individual freelancers. The pricing of our services is reasonable compared to other legal service providers in the country. With us, you won’t have to worry about the process since you can keep track of the status at every stage. We will be completely transparent throughout the entire process. Our customer is always available to solve your queries.