Comprehensive Q&A bank for Labour law on concepts, compliance procedures and other issues pertaining to HR Policy, ESOPs, POSH Act and more.

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What is Fixed Term Employment?

Fixed Term Employment is a flexible work arrangement wherein an establishment hires an employee for a fixed period of time. Fixed term employees are not a part of the permanent workforce, and the employee is not on the payroll of the establishment, for his/her payment is fixed in advance in his/her contract with the employer.


Although the fixed term employment was recognised concept under the Industrial Employment (Standing Orders) Act, 1961, as a classification to ‘workman’, the concept of fixed term employment is formally introduced by the Industrial Relations Code, 2020.

A Fixed Term Employee enjoys the same rights as permanent employees doing the same work or of a similar nature. They are entitled to similar work hours, wages, allowances and other benefits, as that of a permanent employee.


Under the extant labour and employment laws the Fixed Term Employees were not entitled to gratuity. However, under the Code on Social Security, 2020, the Fixed Term Employees are also eligible for gratuity on rendering services under the contract for a period of 1 year. This period is stipulated as 5 years for permanent employees.

Yes, an employer has the right to terminate a fixed term employment contract before its actual due date, as per the terms and conditions mentioned in the contract. <Guidance Note to Employee Exit>


Similarly, an employee also has the right to terminate his contract before the due date, as per the terms of the contracts, and by serving a proper notice.

Under the Industrial Relations Code, 2020, the Fixed Term Employees are eligible to all statutory benefits, that are available to permanent workers/ employees of the organization/ establishment. A Fixed Term Employee is eligible to all applicable statutory benefits, calculated on a proportionate basis according to the period of service rendered by him/ her.

The Fixed Term Employees are eligible for gratuity. However, even if they render their services for less than 1 year, they may be eligible for the gratuity calculated on a pro rata basis..

In the past, the contractual employees employed for series of terms have argued to be made permanent employees. However, in 2006 the Indian courts have settled and clarified that permanent employment cannot be claimed as a matter of right. In addition, under the Industrial Relations Code, 2020 there is no statutory ceiling on the number of times an employer can renew the fixed term contracts. Therefore, employers are at liberty to extend the Fixed Term Employment at their discretion.