Legal Guide

What is a Fixed-Term Employment Contract?

by Bhavya Choudhary · 4 min read

fixed-term employment contract

Introduction

  • The industrialization has provided a work-life balance to various people; it has provided various employment opportunities to different people around the world.
  • With this perspective, Fixed-term employment was formally established in March 2018 by amending the Central Rules of the Industrial Employment (Standing Orders) Act of 1946. 
  • This enabled all industries to hire temporary workers by executing fixed-term employment contracts with them.
  • In general, fixed-term employment is a type of work in which an establishment hires an employee for a set period of time. This period is specified in the employment contract and may be renewed after it expires, depending on the requirements of a specific role.

Features of a Fixed-Term Employment Contract

  • The law governing fixed-term employment contracts is widespread in the sector nowadays; you need sound legal advice.
  • It is crucial to comprehend how it began before moving on to understand its advantages and significance. It is a contractual arrangement that the employer and employee have for a specific amount of time.
  • The country’s labor regulations govern these contracts. The goal is to ensure that the employer doesn’t engage in unfair practices, such as failing to pay salaries or firing employees unfairly, etc.
  • It eventually creates a permanent contract, but only if the employer chooses to do so, subject to the employer’s right to terminate employment with notice and a good reason.
  • A fixed-term agreement often expires on the date specified in the contract. The employer need not necessarily mention the notice. However, this might be regarded as a firing process.
  • The employer is prohibited from firing a fixed-term employee unfairly after two years of work with the organization. The employee has a right to a written explanation of the dismissal.
  • When an employee is fired for a redundant cause and has worked for the company for two years straight, he is eligible for statutory redundancy pay, just like a permanent employee.
  • One of the problems of the fixed-term employment contract is job insecurity, which may lead a nation’s law to restrict the circumstances and applications of this contract.
  • There is a distinct difference between fixed-term employment contracts and long-term employment contracts in countries with tight labour rules.
  • There usually is a lower extent when employee legislation is less protective for employees. When discussing the Indian context, a recent fixed-term employment contract began.
  • When the government emphasized fixed-term employment contract law more in 2018, those covered by these contracts had the same rights to pay and benefits as permanent employees.
  • As previously indicated, a fixed-term employment contract can sometimes lead to permanent employees. The United Kingdom is one example, where any employee who has been on a fixed-term contract for more than four years would automatically become a permanent employee.

Benefits of Fixed-Term Employment Contracts

  • Countries like India have prioritized fixed-term employment contracts for several reasons. Fixed-term employment contracts undoubtedly have several advantages for both employees and companies.
  • Employers look for quality services from their staff for a brief period in both scenarios. They stress fixed-term employment contracts to ensure an appropriate supply of orders at the proper time. Both employees and employers gain from a fixed-term employment agreement.
  • Additionally, workers are protected since they get legal benefits 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 equivalent to the worker’s period of service.

Employer’s Fixed-Term Employment Contract Rights

You gain the following perks as an employer:

  • As an employer, you obtain a qualified applicant with specialised knowledge for a specific project or period.
  • Another advantage of this contract is that putting workers through a probationary term and reviewing their work is a beautiful way to boost labor when there is more significant demand. Once you are pleased, you can convert their temporary work agreement to a permanent one.
  • This allows for the conversion of paternity and maternity leaves, making fixed-term employment contracts more appealing to employees. The expectant mothers are allowed to take leaves.
  • The many benefits a fixed-term employment contract offers mean that you may anticipate more commitment from the personnel. Employers are encouraged to provide their employees with permanent positions using fixed-term employment contracts.

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

  • There is a chance that an employer will want to terminate the agreement early, but this requirement must be included in the contract. In this scenario, a minimum notice of.
  • Employees who have been with the employer for a month or longer must give notice for one week.
  • If the worker has been with the company for more than two years, one week every year.
  • The same rule applies to employers, who must give at least one week’s notice if an employee leaves after working for at least a month.
  • The contracts must include all of this information. As a result, it is crucial that both the employee and the employer carefully study the agreement before approving it.
  • The implied agreement applied to prolong the fixed term if an employee continued to work after the fixed-term employment 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 employees if they continue working for four years.
  • A management agreement permits the third party to run one of your enterprises; this is comparable to a franchise agreement. You will continue to be the business’s owner, but the operator will be in charge of managing it daily.
  • The franchise agreement is a binding legal document. It lays forth the guidelines for the franchising arrangement that have been accepted by both the franchisor and franchisee.

Conclusion

If the employer terminates a fixed-term employment contract earlier than expected, you are entitled to a notice period. Keep in mind that this depends on the terms of your agreement, and contact a good advisor for some legal advice.

For instance, the employer may include a notice period of a week or a month (it is one week for each year that you have worked and if you worked continuously for two years or more).

To get your Employment Contract drafted, one must consult an expert labor Law lawyer. Apart from saving time, an expert also looks at all the technicalities involved in a draft.

Bhavya Choudhary

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Bhavya Choudhary

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