Professional Documents
Culture Documents
The Future of Fixed Term Employment in India
The Future of Fixed Term Employment in India
Piyali Ghosh
OB & HR Area, Indian Institute of Management Ranchi, Ranchi, Jharkhand,
India
T
he industrial relations (IR) environment in India and its labour market, have
been undergoing significant transformations in multiple domains for around
two decades after the economic liberalization. Gillan and Lambert (2013)
observe several restructurings at the workplace level in the country. These include,
among others, farming out job functions or services to any third party through
outsourcing, engaging contract labour in the organized sector, the tendency among
managers to avoid acknowledging the right of trade unions to collectively bargain
and the prevalence of voluntary retirement schemes for having numerical flexibility
of the workforce.
In tandem with such changes, precarious forms of work are growing steadily, with
‘a generous use of flexi-category workers’ (Sapkal & Sundar, 2017 p. 342). One
such flexible work arrangement, namely fixed-term employment (FTE) has been
a subject of debates and controversies. The Ministry of Labour and Employment,
Government of India, introduced FTE in 2018 under the classification of workers in
KEY WORDS the Industrial Employment (Standing Orders) Central Rules, 1946. Any FTE worker
Fixed-term Employment is to be hired for a fixed period on an employment contract provided in writing.
Though the duration of employment is fixed, a worker under a fixed-term contract
Fixed-term Contract
(FTC) is to be treated at par with a permanent (i.e., regular) worker for all aspects
Code on IR of service conditions like wages, allowances, other benefits, and hours of work.
Standing Orders Act This work arrangement is all set to get new emphasis with the introduction and
Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-NonCom-
mercial 4.0 License (http://www.creativecommons.org/licenses/by-nc/4.0/) which permits non-Commercial use, reproduction and distribu-
tion of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.
com/en-us/nam/open-access-at-sage).
implementation of the upcoming Labour Codes (Code forces (Deakin, 2009). Therefore, labour regulations,
on Wages, 2019; Code on Occupational Safety, Health & more specifically the ones which aim to provide
Working Conditions, 2020; Code on Social Security, 2020 employment stability, are hindering new investments
and Code on Industrial Relations, 2020). and economic and employment growth (Posner, 1984).
Counter to this laissez-faire proposition, there have
Our study analyses the operational feasibility of having been ongoing debates citing the success of various state
FTCs in India by discussing their merits and demerits. initiatives to improve labour market indicators.
We have limited the scope of the article to issues like
unionization of workers on FTC, termination of such Labour productivity has been growing significantly
workers and their inclusion in workers’ participation since 1991 in India. The real gross domestic product
in management (WPM) of industries. Ahead of the per employed person has increased by three-and-a-
introduction, the study briefly discusses the restructuring half times since 1991, while the average productivity of
process in the Indian labour market, followed by a labour in the organized sector has grown around three
section that presents some of the advantages that FTE times (Dasgupta & Kar, 2018). In contrast, the labour
could bring to employers and some pertinent concerns force participation rate has gone down. Such factors,
related to workers in the Indian context. The section after coupled with a near-constant unemployment rate,
that, reviews the practice of FTCs in other countries, the indicate that the proportion of the population looking
merits and demerits of these contracts and the prevalent for employment has risen sharply. Real wages have also
practices of duration and rules of renewal. A discussion increased, although at a variable rate, across various
on policy options for regulating FTCs follows, and the skill levels. We consider this combination of increasing
study ends with concluding remarks. real wages and growing unemployment as a unique
labour market outcome.
employment. Evidently, the drop in agricultural scheme was withdrawn. More than a decade later, in
labour has not resulted in commensurate growth in the October 2016, the Government introduced FTCs in the
organized sector workforce. apparel manufacturing industry. The seasonal nature
of employment in the industry was put up as the
Since the past decade, the Government has been underlying rationale for flexible laws.
attempting to overhaul the archaic and oft-cited rigid
labour laws, so that the regulatory framework gets more In 2017, the Government extended this form of
in sync with the modern business landscape, pushing employment in the leather and footwear sectors under
for higher employment flexibility. As a part of labour the ‘Make in India’ Scheme and the National Skill
reforms, four categories of Codes have subsumed and Development Mission. Now, with the 2018 notification,
consolidated 25 central labour laws. The Labour Codes the Government has elaborate plans to incorporate FTE.
are also expected to bring about better compliance The Code on IR, which will subsume the Industrial
with legal provisions. Of these, the Code on Industrial Employment (Standing Orders) Act, 1946, has included
Relations (referred to interchangeably as Code on IR provisions for FTE. As per Section 2 clause (l) of the
from this point ahead) is already inviting criticism for Code, FTE refers to ‘the engagement of a worker on the
giving FTE legal sanction, on the grounds of further basis of a written contract of employment for a fixed
reducing formal, stable and regulated employment period’.
(Roychowdhury & Sarkar, 2021).
FTE is now applicable to all industries to promote ease
of doing business. A worker on FTE shall get all the
ISSUES IN FIXED-TERM EMPLOYMENT MODE IN
statutory benefits that a permanent worker is entitled to.
THE INDIAN CONTEXT
Benefits like gratuity are to be given in proportion to the
FTE is not new in India. In 2003, the Government service the FTE worker renders, even if the tenure is less
introduced FTE amidst stiff opposition from all central than the qualifying period of employment stipulated in
trade union organizations (CTUOs). Consequently, this the respective legislation.
The Indian labour market is still not favourable to Lack of clarity on unionization for FTE workers could
workers. Flexibilities through contractual work have bring multiple problems. The absence of a collective
emerged as a ‘major irritant in the IR scenario of India forum in the form of a trade union could expose such
in the last decade’ (Sohani, 2015, p. 144). The majority of non-regular FTE workers to the risk of being deprived
the labour laws are applied only to large establishments, of legitimate benefits. Even if these workers are allowed
to which, by and large, unions are also confined. to join a union, would an employer pay heed to the
Compliance with labour legislation usually involves a issues peculiar and restricted to FTE workers? One
cost to the employer to revise wages, contribute to social recent example is of FTE workers of Alliance Air, a
security, and so on. Unions further contribute to such an subsidiary of Air India. These workers were being paid
increase in costs and lessening of functional flexibility. lower wages and given fewer benefits compared to
Hence, there has been a tendency in establishments permanent workers. Air India reportedly ignored the
in the organized sector to avoid applying labour laws workers’ demands put up by the Centre of Indian Trade
and the formation of trade unions by ensuring that the Unions (Hemalata, 2018).
workforce employed is small (Papola, 1994). Further,
within an establishment, the category of permanent
Other Issues
workers is mostly unionized and enjoys the best
social security coverage and emoluments compared Workers engaged through a contractor could be on
with the other types of workers (Vijay, 2005). Regular the permanent rolls of the latter. Hence, removing
contract workers mostly do not have a social security or contractors as an intermediary at the cost of fixed-
emoluments package, nor are they members of a trade term arrangements directly with the employer could
union within the establishment. invite precarious employment status. We foresee an
interesting trade-off for workers on FTE, as they would
Another concern is that multinational companies get legal recognition but would not have any right to
(MNCs) tend to victimize employees if they try to regularization on completion of the contract.
Failure to comply with the provisions of the CLRA Apart from the lack of clarity on its implementation
Act (which will be subsumed under the Code on procedure, aspects like the duration of an FTE, provision
Occupational Safety, Health & Working Conditions, for renewal of FTE, and implications of such renewal
2020; e.g., failure to register the establishment of hiring are still unclear. Termination of FTE workers could
contract labour), fetches only penal consequences also be challenged as it contravenes the existing legal
equivalent to imprisonment and fine. Nowhere does provisions. It would be interesting to see the wage/
the Act provide for regularization of contract labour in salary structure of workers on FTC. Establishments
such an establishment. Policymakers have to be careful that engage such workers, once the Labour Codes are
in framing any guidelines regulating a FTC regarding effective, have to strategically plan out wage/salary
whether the failure of compliance could have only penal payment. The choice between a consolidated pay or a
Kanupriya Jain is presently working as Assistant engagement, and training and development. She has
Manager (Talent Acquisition & Special Initiatives) with co-authored a book on Industrial Relations, besides
the Larsen & Toubro Group in India. She graduated with having to her credit more than forty research papers
MBA in HRM from the Indian Institute of Management published in international journals, including the
Ranchi, Jharkhand, India. Prior to this, she obtained a International Journal of Manpower and Personnel Review.
BTech Degree in Energy Engineering from the Maulana
Azad National Institute of Technology, Bhopal, India. e-mail: piyali.ghosh@iimranchi.ac.in