Legal Guide

What is a Fixed Term Contract?

by Bhavya Choudhary · 3 min read

fixed term contract

Introduction

  • There are different ways for nations to gain from the expansion of industrialization. However, at the same time, it has also increased the need for a fixed process that might aid in streamlining work for both employees and employers.
  • In India, there are many different types of industries; however, due to the nature of their job, some sectors, such as leather, textile, food, etc., do not operate year-round. Changes in consumer behavior may lead the demand in this circumstance to decline, while it may also spike sometimes.
  • Employers look for quality services from their staff for a brief period of time in both scenarios. They stress fixed-term employment contracts because they want to make sure that there is the appropriate supply of orders at the appropriate moment.
  • Both employees and companies gain from Fixed Term employment contracts. Additionally, employees are protected since they get legal benefits that are covered by the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018. The latter specifies that all compensation, benefits, and working conditions must be comparable to those of a permanent employee.
  • All of these perks are comparable to the worker’s time of service. These terms are included in a fixed-term contract, which we shall cover more in this blog.

Fixed term Contract Benefits

Countries like India have prioritized fixed-term employment for a number of reasons. Fixed-term contracts undoubtedly have several advantages for both employees and companies. They are:

Employer’s Fixed Term Contract Rights

You gain the following perks as an employer:

  • One advantage of this form of contract is that it’s a wonderful method to expand labor when there is a bigger demand by placing them under a trial term and reviewing their work.
  • As an employer, you receive a specialized candidate who has expert knowledge for a certain project or time. Once you are pleased, you can convert their temporary work service agreement to a permanent one.
  • This allows for the conversion of paternity and maternity breaks, making fixed-term contracts more appealing to employees.
  • Accurately project resources and spending.
  • Due to the many benefits that fixed-term contracts have to offer, you may anticipate more commitment from the employees.
  • Fixed-term employment also encourages firms to give their workers permanent positions.

Rights under a Fixed Term Contract as an Employee

  • A person who is hired as a fixed-term employee has the same privileges as a permanent employee. They are qualified for the same pay, benefits, and working conditions. Therefore, the same benefits that are provided to permanent employees, such as the package, protection from unfair dismissal, and equal pay, are also provided to the fixed-term employee.
  • In some instances, fixed-term employees are paid more than their permanent staff because of their special skill, which is necessary for the type of role they have been hired for. On the basis of your success and the needs of the organization, there is also a higher likelihood that the fixed-term employment will be converted to permanent contracts.

What is covered under a Fixed Term Contract?

Some circumstances may differ from organization to organization when creating the checklist for fixed employee contracts, but some elements always hold true. As a result, we are providing you with a list of the following requirements for every fixed-term contract:

Details that must be included in any contract include:

  • The names of both employer and the employee
  • the employer’s address
  • the employee’s place of employment
  • the designation or title of the position and a description of it
  • the date on which employment began.

Pay and benefits

  • Salary or earnings, overtime (if applicable)
  • any other type of compensation for which the employee is qualified
  • the method used to calculate wages
  • any other benefits.
  • Pension plan

Type of Contract

  • Fixed-Term Duration of a Fixed Term Contract
  • Notice Period in the Event of Termination of Employee

Work hours

  • Alternative work schedules
  • Overtime definitions, staffing standards
  • Meal and rest breaks
  • Timekeeping 
  • Attendance guidelines

Leaves 

  • Annual leave eligibility 
  • Requirements for taking a leave of absence 
  • Sick leave and other paid leaves

Disciplinary measures 

  • Information about the country’s disciplinary processes 
  • Criteria for terminating an employee by their employer

Health and safety obligations 

  • Use and abuse of electronic communication and the internet; the specifics of a confidentiality agreement.
  • Benefits that employees will get in accordance with the fixed term contract. Probation Period.

Evaluation of Performance 

  • Performance evaluation standards
  • Retirement Policy 
  • This section of the contract included information about the employer’s retirement plan.
  • Employees are given uniforms to wear

The employee accepts the aforementioned guidelines as well as any other terms they may have provided. Make sure you carefully read the contract’s terms and conditions.

What happens when a Fixed Term Contract expires?

The following things might happen if the fixed-term contract expires:

Early Conclusion of Fixed term Contract

  • There is a chance that an employer will want to terminate the agreement early, but this need must be included in the contract. In this scenario, a minimum notice of
  • The same rules apply to employers, who must give at least one week’s notice if an employee has worked for them for at least a month. 
  • One week is required if the employee has worked for the employer for a month or more. 
  • One week for each year if the employee has worked for the employer for more than two years.
  • The contracts must include all of this information. As a result, it is crucial that both the employee and the employer carefully study the contract before approving it.

What should be done if a Fixed Term Contract expires?

  • The implicit service agreement applied to prolong the fixed term if an employee continued to work after the fixed term contract’s expiration date without a renewal. 
  • The fixed-term employee automatically becomes a permanent employee and is entitled to all the advantages of permanent workers if they continue working for four years.

Unjust Termination

  • There is a chance that the employee will be fired by the employer without cause. Additionally, failure to renew the contract on time is regarded as termination. 
  • The employer must provide a legitimate justification for the same if the fixed-term contract is for at least two years.

Conclusion

A fixed-term contract is used to hire workers or employees for a certain time period, usually one or two years. After a maximum of five years, the employee may be assigned to the firm as a permanent employee in accordance with the applicable legislation.

To get the fixed-term contract made, one must take legal consultation as there are many technicalities involved. Legal consultation makes your work easier apart from saving time. 

In any case of employment being fixed or full term, the employee must have a clear understanding and approach to the clauses which are mentioned in the agreement, and it is a wise decision to clarify it with a lawyer consultation service to avoid any complications or dismissals in the future.

Bhavya Choudhary

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Bhavya Choudhary

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