November 01, 2020

Fixed Term Employment: Backdoor Policy to Legalise ‘Hire & Fire’

Nishith Chowdhury

ON fixed term employment – the new system of employment for fixed duration – the BJP-led NDA government at the centre has been moving in a planned manner to give special benefits to the domestic and foreign corporates under the garb of labour law reforms. It is one of the major concessions being granted to them.


In October 2016, the government first introduced fixed term employment in apparel sector. Later in 2017, to promote the so-called 'Make in India' and 'National Skill Development Mission', it was introduced in the leather industry and footwear sector. Later, the government amended the Industrial Employment (Standing Orders) Central Rules to introduce fixed term employment in all industries and issued gazette notification, ignoring the forceful opposition of the organised trade union movement and, thus, legalised it for all industries.

Now-repealed Industrial Employment (Standing Orders) Central Rules under the Act specified the matters to be included in the Standing Order specifically to classify the workmen as to whether ‘permanent, temporary, apprentices, probationers, or badlis’. Accordingly, the definitions of different types of employments were specified in Schedule-1 of the Model Standing Order Rules framed under the Act.

Industrial Employment (Standing Orders) Central Rules were amended and notified through Gazette on October 6, 2016. In its Schedule, in item 1, ‘after the word “badlis,” ‘fixed term employment workmen in apparel manufacturing sector’ was inserted and specified in the Rules through GSR 976 (E). It was extended to ‘leather industry and footwear sector’ in 2017 followed by ‘employment in all types of industries’ through amendment and gazette notification on March 17, 2018, thereby, legalising this system of employment in all sectors.

At the same time, changing the rules in this regard, it was stated in Schedule 1 -  ‘A “fixed term employment workman” is a workman who has been engaged on the basis of a written contract of employment for a fixed period provided that (a) his hours of work, wages, allowances and other benefits shall not be less than that of a permanent workman; and (b) he shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute’ [G.S.R. 235(E)].

In the same notification, a provision is also there that permanent posts would not be abolished as a result of this new system of employment. A new section 3A was inserted in the Rules specifying, “(3A) No employer of an industrial establishment shall convert the posts of the permanent workmen existing in his industrial establishment on the date of commencement of the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018 as fixed term employment thereafter.” Further item (6A) in Rule 5 is substituted as “(6A) Number of fixed term employment workmen;” ensuring the specifying number of Fixed Term Employees (FTEs) in the Certified Standing Orders of any establishment.

Thus, from these, it may be presumed that, as a result of this notification, the workmen under fixed term employment shall be entitled to similar working hours, wages, allowances and other benefits as those of the permanent workers and they will also get other statutory benefits including gratuity at the same rate proportionately for the period of their service; the total number of such workmen to be employed in the industrial establishment, will also be specified in the certified standing order; and that such appointment will not result in abolition of permanent posts. The employers now are able to hire workers in this system directly without any contractor in-between.

In many other countries, such system of fixed term recruitment has been in place for several years, but there is a time limit. In Belgium, a person can be employed for a maximum of four times of two-year term each; in France two times of one-year term each; in Germany three times of two-year term each. The UK has a provision of granting status of permanency after four years of continuous service as fixed term employee; in China and Vietnam maximum two terms are allowed and making them permanent thereafter. But, in our country there is no cap on the number of times or the fixed-term of years for fixed term employment.  

The Contract Labor (Regulation and Abolition) Act 1970 also did have some hurdles for the employers in hiring contract workers in perennial jobs though such provisions in the law were totally ignored not only by the private entrepreneurs but also by State-owned enterprises. The country's trade union movement also virtually failed in invoking such provisions in the Act. Most of the provisions of the now-repealed Contract Labour (Regulation and Abolition) Act 1970 governing the hiring of contract workers, are kept in the newly enacted Occupational Safety, Health and Working Conditions Code in diluted form to the advantage of the employers.

In addition, the Industrial Relations Code 2020 has been exempted in all industrial establishments by increasing minimum number of workers threshold from 100 to 300, thereby, excluding 70 per cent of industrial establishments and 74 per cent of the organised sector workforce from all the labour laws granting the extraordinary power of ‘hire and fire’ at the sweet will of the employers. Those exempted 70 per cent industrial establishments are not required to have any certified standing order for regulation of employment. For those employers, the fixed term employment is almost same as ‘hire and fire’ being legalised.

But the matter did not stop here. The Industrial Relations Code was hurriedly and forcibly passed in the parliament on September 23, 2020, repealing the three Acts viz., Industrial Employment (Standing Order) Act, 1946, the Industrial Disputes Act, 1947 and the Trade Unions Act, 1926.
The definition of “fixed term employment workman” in Schedule 1A of the modified Rules of the Industrial Employment (Standing Orders) Act, 1946, notified on  March 16, 2018 through G.S.R. 235(E), has been retained in the newly enacted Industrial Relations Code 2020 with modification that such FTEs will be entitled for gratuity payment if they work for one year. Sections 26 to 39 of the I R Code say a lot about the standing orders and the points to be included in the standing orders specifying in Schedule 1 of the Code. It has further been said that the central government would announce the model standing orders at a later date.

But surprisingly, the provision that no employer of an industrial establishment shall convert the posts of the permanent workmen existing in his industrial establishment as fixed term employment is nowhere visible in the I R Code. Naturally, speculation is rife as to why such unscrupulous silence in the Code. ‘Firms can now convert permanent jobs into fixed-term contracts’ has been the headline of the print media, including Deccan Herald, Business Standard Delhi edition on October 5, 2020. So, will the employers be allowed to convert the posts of permanent workmen to fixed term employees in future? If there are no permanent posts and, for that matter, no permanent employees, the provisions of getting same and similar wages and benefits in the fixed term employment will become utterly unfounded.

What is the recent experience? As on date, even under central government, in Alliance Air (a subsidiary of Air India), all the operational employees flying the aircraft are under fixed term employment and their wages and benefits are much less than the regular employees of Air India. Similarly, in ONGC, a large section of workers in exploration work are on fixed term employment for years together but are paid much less than similarly placed regular workers of ONGC. Hence the tall talks of granting similar working hours, wages, allowances and other benefits to the fixed term employees are basically a deceptive and manipulative ploy to legitimise the fixed term employment.

Fixed term employees, under constant threat of discontinuance of employment altogether and allurement of renewal of the term-employment, will not be in a position to assert and demand those facilities from the employers. It is amply clear that this fixed term employment provision is designed virtually to do away with the very concept of regular employment in organised sector with dubious intent of minimising labour cost and also to ultimately eliminate trade unions from the workplaces to ensure hassle-free exploitation by the employers.