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Fixed term employment in India

Published: 02 Feb 2018

The Government is considering a proposal to allow fixed term employment to empower the employers of all sectors to recruit the employees on fixed term basis for short term projects.

The underlying reason for this development is that government allowed textile industry to retain employees on fixed term basis following which it received demands from various sectors to allow such sectors to engage employees on short term basis for fixed projects. 

In 2003 the then UPA government’s efforts to make such move were scrapped due to protests by trade unions. Again in 2016, NDA government attempted to put into effect the proposal and the proposal again got shelved due to strong opposition from trade unions.

The apparent intent of said proposal is to accord equilibrium amid the interests of employers and employees by facilitating employers to employ workers as per the demands of the market and ensure that such workers acquire equal pay and eligible to all benefits that are bestowed on the permanent workers.

Companies are restraining themselves from engaging permanent employees for short term assignments (related to a particular projects or seasonal projects) as they are burdened to comply with the procedure commanded by law on the termination of the permanent employees.

Under the Industrial Disputes Act, upon the termination of the permanent employees, industries are obliged to meet the terms of retrenchment (including giving prior notice of termination, paying arrears of compensation to the terminated employee, and intimating the government of the employee termination).

Enforcement of fixed term employment may encourage companies to employ workers for short span projects and terminate the workers at the end of the projects without ensuing the gist of formalities they have to adhere to for permanent employees under the existing laws.

This could certainly benefit industries to execute their projects comprehensively with fixed term employees without much hassle.

On the other hand, employees engaged on fixed term will be qualified to adore each and every benefit conferred on the permanent employees including the right to be a member of a trade union.

This proposal is opposed by the trade unions and they demand to focus on enhancement of permanent employment rather than enforcing the fixed term employment.

Despite of the opposition by the trade unions, from a practical point of view one should understand that with the enforcement of fixed term employment will certainly result in providing employment to unemployed and enhance the productive of all the designated sectors – impeding the enforcement of fixed term employment is nothing but obstructing the development of nation economy and contribute to upsurge in unemployment - as most of the companies are not profound  on fetching permanent employees for short term assignments.

It may be a good to test the fixed term employment mechanism to generate jobs enhancing the production of all revenue generating sectors – ultimately boosting the economic development of the nation.

Research and inputs by Paruchuri Baswanth Mohan

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About the author :

Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at bhumesh.verma@corpcommlegal.com.

Bhumesh Verma

Firm: Corp Comm Legal
Country: India

Practice Area: Contract

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