Legal Guide

What is the Meaning of Fixed Term Employment?

by Bhavya Choudhary · 3 min read

fixed term employment


It is an agreement or contract where an employer hires an employee for a designated period. Usually, the contract lasts for a year, but it can be exceeded if the company requires it.

A company or an organization may hire an employee for a specific period. It is done through a contract named fixed term contract or also known as Fixed Term Employment, where the specified terms can be increased according to the company’s requirements. The employee is not on the payroll for such Fixed Term Employment.

Fixed term employment

  • Under the contract of Fixed Term Employment, the salary of the employee remains unaltered till the expiry date of the contract. The payment received by the employee is fixed. The company expects quality services from the employees for a fixed period.
  • Fixed Term Employment is of a temporary type and cannot be made for standard jobs. The company cannot replace the already existing employees using the Fixed Term Employment contract.
  • The contract is signed by both employer and employee for a specific period. The Fixed Term Employment contracts benefit both parties as a temporary dependency.
  • Example: IT companies hire such employees for particular project fulfillment. After the project is accomplished, the employees can be comprehended again for either full-term jobs or project-wise.
  • Some companies in India use this method to shortlist the performance during the term of employment and then decide on the final employee list. This helps in understanding the potential and determination of the employee towards a company. 
  • The management of the company is responsible for this process and hires employees on Fixed Term Employment contracts.

Termination of the Fixed Term Employment contract

  • The contract for Fixed Term Employment also has a provision for termination, just like any other agreement/contract.
  • The employer can terminate the agreement before the expiry date in case of any circumstances which are not in favor of the company. There are certain grounds to perform the termination. These are:
  • The company can call off the contract if the performance of the employee does not profit the company in any way.
  • The employer can cancel the contract if it is proven that the employee has committed fraud or disclosed sensitive information.
  • The contract can be terminated if the employee is not accessible or on leave without announcement.

Laws governing Fixed Term Employment

  • This type of employment was formally introduced on March 18, amending the central rules of the Industrial Employment (Standing Orders) Act 1946. It has enabled every type of industry to use the method of Fixed Term Employment.
  • The term is fixed for the employee, but the company can hire the employee again after its expiration.
  • A new Fixed Term Employment contract can be made after the company or organization decides to establish a permanent role.

Employers Perspective

Such an employment agreement can be flexible and benefit the small industries as they take on short projects and complete them with Fixed Term Employment workers. Mainly seen in industries that have demand for goods and services depending on a seasonal variety.

Employee Perspective

The employees gain proper work experience and earn short-term salaries from which they can, later on, decide whether to work for the same company or not.

Provision of a Fixed Term Employment

  • A very noticeable change was made in Section 53 of the Code on Social Security that the gratuity is paid after the contract of Fixed Term Employment ends.
  • The five years of service continuity are not required in case of expiration of the fixed term employment. The employee’s gratuity is paid on a pro-rata basis in the case of Fixed Term Employment.
  • The discussion may further arise as the one-year employment method is applicable to workers and not employees. It is stated in the proviso of “rule 35” of the “Code on Social Security (Central) rules,” 2020, that every employee in a Fixed Term Employment is qualified to receive a gratuity if they provide service under the contract for a given time.
  • There is no difference in the definition between workers and employees and their gratuity, compensation, fees, and working hours as per the proviso.
  • The eligibility and the gratuity pay depend on the operation of different types of clauses and their consequences.

Mandatory details in a Fixed Term Employment contract

Some conditions are different for every organization, and the pointers for such contracts are:

  • The name of the employer
  • The name of the employee
  • Location of job
  • Employment duration and the start of it
  • Job Description
  • Job title
  • Salary and wage
  • Additional benefits
  • Method of payment and the pension scheme
  • Working hours per day
  • The attendance and timekeeping requirements
  • Leave entitled and the condition related to it
  • Terms and conditions with the action needed to be fulfilled
  • Roles and responsibilities of both the employer and employee
  • Confidentiality agreement

These are the few points mentioned in a Fixed Term Employment contract which includes many other terms and clauses, and this differs from one company to another, so it will be advantageous to take legal advice beforehand and gain knowledge regarding clauses mentioned in such contracts.

What is Unfair Dismissal?

  • When the employer fires or terminates the employment agreement under improper grounds or does not provide a valid reason for such action, it is then a case of unfair dismissal.
  • The employer needs to provide solid reasoning behind the dismissal of the employee even after the work contract lasted for two years. The employee may seek legal advice in such cases of unfair dismissal as the company is obligated to provide the reason and gratuity after the end of the contract.


The fixed-term employment contract is used to recruit workers or employees for a short period of designated time, such as one or two years. It can be up to 5 years, after which the employee may be appointed as a permanent employee of the company as per the laws governing the same.

In any case of employment being fixed term 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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