Vol. XLII No. 15 April 15, 2018

Fixed Term Employment for Promoting Ease of Doing Business


THE World Bank’s ease of doing business index in 2018 ranked India at 100, up from 130 a year ago. Buoyed with this report, the BJP government has reportedly targeted 90 reforms to further climb up the ladder to reach the top 50.

Extending Fixed Term Employment to all sectors is undoubtedly one such measure.

On March 16th this year, the government issued a Gazette notification amending the Industrial Employment (Standing Orders) Central Rules, 1946, allowing Fixed Term Employment in all sectors. This was done to bring into effect the announcement made by the finance minister Arun Jaitley in his budget speech this year.

In fact, the BJP’s enthusiasm for curtailing permanent employment replacing it with fixed term employment was displayed during the Vajpayee regime itself. In 2003, the then BJP led NDA government issued a Gazette notification introducing fixed term employment, despite the opposition from all the central trade unions. This notification was withdrawn through another Gazette notification by the then UPA I government, in the wake of widespread protests by the trade union movement.

Soon after coming to power, the BJP government appears to have made introduction of fixed term employment one of its priorities in labour reforms. In April 2015, it has issued a draft notification to that effect but did not proceed further when all central trade unions opposed the move. But in October 2016 the BJP government introduced Fixed Term Employment in the apparel manufacturing sector ignoring opposition of the trade unions; in 2017, this was extended to ‘made up’ sector, which includes, in addition to garments, bed sheets, towels etc. At every stage, CITU conveyed its strong opposition to the government which was followed by other trade unions also.  In 2018, Fixed Term Employment has been extended to all sectors without even consulting the trade unions.

While all central trade unions, including the BMS which is a part of the BJP’s parivar, have vehemently opposed the notification and the way government let go of tripartism, the employers have welcomed it. Pradeep Bhargava, chairman, CII National IR Committee has been reported to have said ‘It is going to boost business sentiment...Today companies hire and fire due to seasonality. This is just formalising, legitimising what is already going on’. This in one way, sums up what the BJP government is doing in the name of the so-called ‘labour law reforms’ – it is legitimising the violation of the existing laws by the employers, to promote ‘ease of doing business’ for them.

Fixed Term Employment means that a worker is employed for a fixed period. The contract is duly signed by both parties and is for a specified period of time. His or her service will automatically end after that specified period if the contract is not renewed. It is not necessary to give any notice of termination of service or make any payment in lieu of notice as in the case of temporary and badly workers. An employer can directly hire a worker for a fixed term without any contractor.

The employer can terminate the contract even before the due date on certain grounds like non performance, fraud etc. It is obvious that an employee with an individual contract for only a few months or a year cannot effectively counter allegations of non performance by the employer. This virtually means granting ‘hire and fire’ regime for the employers even without amending the Industrial Disputes Act at the central level. 

After the notification of 2016 which allowed Fixed Term Employment in the apparel manufacturing sector, the ministry of labour and employment issued a press release. It justified the measure arguing that ‘the seasonal nature of the textile sector results in fluctuation of demand and hence requires flexibility in employing workers’. This argument itself is totally false. However, how can the government now justify extending Fixed Term Employment to all sectors? Have all sectors become ‘seasonal’ now? The real reason is spelt out by the government while outlining the objectives of the notification as ‘To provide flexibility to the employers in order to meet the challenges of globalisation, new practices and methods of doing businesses’.

According to the notification, the ‘hours of work, wages, allowances and other benefits’ of a worker under Fixed Term Contract shall not be less than that of a permanent workman’. He or she ‘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’

While this sounds reasonably just and welcome, keeping in view the ground realities, it is nothing but ridiculous as well as deceptive. Today, the reality, for vast majority of workers, even in the organised sector, is that the statutory benefits including minimum wages, PF, ESI, maternity benefit etc are not implemented, particularly where the workers are not organised into trade unions. Even permanent workers in most of the private establishments including big multinational companies are threatened and victimised when they try to form unions. In such a situation, the workers with individual Fixed Term Employment contracts of a few months or even years cannot be expected to come together and fight to get these benefits implemented. There have been instances of such contracts in some companies and it is seen that such workers generally do not get provident fund, and other benefits as the permanent workers of the same company. For example, all the workers in Alliance Air, a subsidiary of Air India are employed on fixed term basis for years together, with the fixed term being renewed periodically. They are paid much lower wages and given fewer benefits than regular employees of Air India. Though this issue was repeatedly raised by the general secretary of CITU, Air India did not even reply.

The government also makes the ludicrous claim that Fixed Term Employment will lead to employment generation, particularly of women to the extent that it would lead to social transformation! The press release of the ministry of labour and employment in 2016 claimed that the measure is significant ‘due also to its potential for social transformation through women empowerment; since 70% of the workforce in the garment industry are women, majority of the new jobs created are likely to go to women’.


According to the report of a study, fixed term contracts have increased in many countries in Europe, particularly in Spain where the share of fixed term contracts are over 50 per cent for young workers. 94 per cent of all the newly signed contracts are fixed term. The study showed that over long term fixed term contracts for young workers led to a reduction in the days of employment and also in their wages. The availability of fixed term contracts encourages employers to create low productivity and low pay jobs. The study concludes saying ‘when taking the long view, fixed term contracts are not a stepping stone but rather a stumbling block for the careers of low skilled youths’.

An ILO paper on fixed term employment states that there has been an increase in fixed term contracts in many countries, mainly in Europe, between 2003 and 2011. It says that workers with fixed term contracts have a higher rate of becoming unemployed. For example in the last quarter of 2008, in Spain 15 per cent of fixed term employees lost their jobs compared to 2.5 per cent permanent workers. During economic downturns employers first target the fixed term employees to bring down costs. During the latest global crisis in many countries there was increased hiring of workers on very short term contracts substituting permanent hiring, to keep labour costs flexible.

In fact, this is yet another attack on the job security of the workers; a measure to make them more vulnerable at the hands of the employers; an arrangement to deny the workers all statutory benefits; to gift the employers with flexibility. Ironically the government claims that allowing Fixed Term Employment will generate employment.