Fixed-term employment is an employment contract in which an employer hires an employee for a limited period/event. Such a contract expires with the completion of a particular project. There were no provisions for labour laws in India concerning fixed-term employment. As per new employment law, private companies can now hire contract workers through fixed-term contracts directly.

This newly amended law will be beneficial to the seasonal manufacturing industries and also for skilled employees. This new law will benefit both the employer and employee. These rules provide salaries/wages, benefits, allowances, etc., that shall be equal to a permanent worker. The change in labour laws has been enquired in various competitive exams. Fixed-term employment is a relevant UPSC topic in the Prelims and Mains question paper.

Comparison with Fixed-term vs Permanent Employment

The permanent employee is given employment for a specific position in an organisation and not a particular project. Permanent employees have to serve the notice period up till the resignation or retirement of the employee.

On the other hand, fixed-term employees are for a specific time or project. Fixed-term employees have engaged in an agreement of work for a set period.

However, fixed-term employees are eligible to enjoy all the benefits of employment that a permanent employee is entitled to, such as gratuity before completing five years of service. However, fixed-term employees cannot avail of retrenchment compensation or a severance package compared to permanent employees. Fixed-term employment in India has given the new direction for labours and replaced the old British labour laws.

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Benefits of Fixed-term Employment

Under fixed-term employment, the wages or salaries of the fixed-term employee are set in advance. Until the completion of the contract, the terms of the contract stay intact. However, such fixed-term contracts are liable for routine jobs and temporary works. Both parties sign a contract for a specified period. Here are some of the benefits to the employees and employers:

From Employer’s View

#1.   The employer gets the skilled candidate who has expert knowledge concerning his/her employment.

#2.   The employer can keep the candidate on probation period for observing his/her performance, and upon evaluation, such candidates can get a permanent employment contract.

#3.   An employer can change the paternity or maternity leaves in the contract.

#4.   An employer can effectively keep the candidate based on the budget.

#5.   Due to fixed-term employment, the employer can expect higher commitment from employees than permanent employees.

#6.   It aids the employer for ease of doing business, and they do not have to involve in trade union disputes.

#7.   It will give a boost to industries and employment and will reduce the diversity of the authority of the business.

From Employee’s View

#1.   Under fixed-term employment, workers will enjoy the same benefits as permanent employees. Fixed-term employees are entitled to the same leaves, wages and working conditions.

#2.   In some cases, based on performance, fixed-term employees are paid higher than permanent employee.

#3.   The company can even extend the fixed-term employment to permanent employee depending upon the employee’s performance.

Therefore, this fixed-term employment provides flexibility to India’s companies to adjust the workforce requirements. However, fixed-term employment also offers job security to the workers. It also does not specify the number of times of contract renewal. Due to these flexible terms in fixed-term employment, it holds an advantage for firms.

Fixed-term employment would be beneficial for the industries engaged in project-based assignments. However, MSMEs do not prefer fixed-term employment as they operate on fewer profit margins. Those enterprises would continue with contractual workers for lesser wages.

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Completion of Contract

On completion of the contract, the situation may arise that the employer wishes to end the contract. However, the employer needs to mention the same for such an end of the contract. In such a situation, one week is necessary for the minimum notice period. Fixed-term employment is only for Industrial establishments and not for commercial establishments. Fixed-term employment contracts have become a necessity within the current situation. IAS aspirants must be aware of the current affairs about the latest changes in the labour code.


Several companies in India hire workers on a contractual basis and make them permanent after the expiry of the contract. The company evaluates the potential and performance of the person before making him/her permanent. A fixed-term employee enjoys the same benefits for wages, allowances, and others equal to a permanent employee. No employer can convert the posts of permanent workers to fixed-term employment. As for fixed-term employment, the company can save a lot on the operational cost by hiring contractual employees. Therefore, fixed-term employment has come as a boon to seasonal workers. It will boost the industry norms and create new employment as well. This fixed-term employment in India is a hot topic for UPSC prelims and mains exams.

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Fixed Term Employment in India: UPSC Notes on New Policies for Labour Laws in India
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Fixed Term Employment in India: UPSC Notes on New Policies for Labour Laws in India
As a UPSC IAS aspirant, are you keen to know about fixed-term employment? Read the article to know which sectors offer fixed-term employment benefits.
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Shilpa is a professional web content writer and is in deep love with travelling. She completed her mass communication degree and is now dedicatedly playing with words to guide her readers to get the best for themselves. Developing educational content for UPSC, IELTS aspirants from breakthrough research work is her forte. Strongly driven by her zodiac sign Sagittarius, Shilpa loves to live her life on her own notes and completely agrees with the idea of ‘live and let live. Apart from writing and travelling, most of the time she can be seen in the avatar of 'hooman' mom to her pets and street dogs or else you can also catch her wearing the toque blanche and creating magic in the kitchen on weekends.

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