Fixed-term Contracts

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What is a Fixed-term Contract?

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

Amongst the different types of industries that exist in India, some sectors like leather, textile, food, etc. do not run smoothly throughout the year because of their nature of work. In such a situation, 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 order on time, and hence they emphasize fixed-term employment.

The fixed term employment contract benefits both the employees and employers. Besides, there is also protection of workers 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 be equal to that of a permanent worker. All these benefits are equivalent to the period of service rendered by the worker. These conditions are mentioned in fixed term contracts that we will be discussing later in the blog.

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Overview

The Fixed term contract law is quite prevalent in the industry today. Before we go ahead and understand how it benefits and its importance, it becomes important to understand how it started. It is a kind of contractual relationship between the employer and the employee that is defined for a certain period of time.

The labour laws of the nation govern these contracts. The objective of this is to ensure that the employer doesn't follow unjust practices like non-payment of wages, unjust dismissal, etc. Eventually, it creates a permanent contract, but it happens in the case when an employer decides to create a permanent contract, subject to the employer's right to terminate employment by giving a notice along with a valid reason.

Job insecurity, which is one of the drawbacks of fixed term contracts, may cause the law of a country to limit the cases and the way they use this contract. In nations where the labour laws are strict, there is a clear difference between fixed-term and long-term contracts.

When employee legislation is less protective for employees, there tends to be a lesser degree. When we talk about the Indian context, a fixed-term contract started recently. It was in the year 2018 when the government emphasized on fixed-term contract law, and employees falling under this contract were entitled to wages and benefits which the permanent employees enjoy.

As mentioned above, in some cases, fixed-term contracts lead to permanent contracts, one such example is of the United Kingdom, wherein any employee who is on a fixed-term contract for more than 4 years will automatically become a permanent employee.

Fixed-term Contract Benefits

There are several reasons why countries like India have emphasized fixed term employment. It is an undeniable fact that fixed term contracts offer several benefits to the employees and employers. We have enumerated a few of them below:

Fixed-term Contract Rights as an Employer

As an employer, you get the following benefits:

  • As an employer, you get a specialized candidate who has expert knowledge for a particular project or time.
  • Another benefit of this type of contract is that it's a great way to increase labour when there is a greater demand by putting them under a probation period and evaluating their work. Once you are 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 the employees.
  • Effectively forecast resources and budget.
  • You can expect a higher commitment from the employees because of the several advantages that the fixed-term contracts have to offer.
  • Fixed term employment also leverages the employers to offer permanent employment to their employees.

Fixed-term Contract Rights as an Employee

  • 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. So, the 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 have been 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.

What does a Fixed-term employment contract include?

When it comes to preparing the checklist for fixed employee contracts, certain conditions may vary from one organization to another, but some of the aspects remain common. So, here we bring you a checklist of those pointers that any fixed-term employment contract must have:

Details those are mandatory in all contracts:

  • 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

Pay and perks

  • 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

Kind of Contract

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

Work Hours

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

Leaves

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

Disciplinary actions

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

Grievance Handling

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

Health and Safety

  • Responsibilities of employee and employer

Confidentiality

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

Probation Period

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

Evaluation of Performance

  • Criteria for evaluating performance

Retirement Policy

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

Uniform

  • Provision of uniform for employees

Acceptance

  • 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:

Early termination

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.

Unfair Dismissal

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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Important Points Related to Fixed-term Contract

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

Before proceeding to any step, you need to check the contact and what conditions it mentions pertaining to the ending of the contract. If there is a clause in the contract that allows you to end the contract earlier, then you have to give due notice. The fixed-term employee has the right to a minimum notice:
  • 1 week, if you have worked with the employer for one month.
  • 1 week for each year if you have worked continuously for two years.
Casual workers are those who are not a part of the permanent workforce, but they do render their services on flexible bases and meet the fluctuating demand for work. They usually work in seasonal industries like tourism, agriculture, etc. They usually work in an industry where work is sporadic.
As a fixed-term employee, you will get several benefits that a permanent employee enjoys. An employee's regular work as per fixed-term contract is 38 hours or more per week are considered as a full-time employee, so the benefits like annual leave, personal leave, and public holidays are applicable to them. But make sure that you do check the fixed-term contract about such conditions. Once you are in agreement with the conditions mentioned in the contract, you must go for acceptance of the same.

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