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Impact of fixed term employment category inclusion in Standing Orders



Anil Kaushik


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The impact of this amendment is that now the employer can appoint a person for a fixed period on contract and after expiry of the contract, he will not be entitled to notice pay or compensation.

The central Govt. has included a new category of workman" Fixed term employment" by amending the Industrial employment (S.O.) Rules 1946.  The notification has been issued on 16. 03.2018.


The impact of this amendment is that now the employer can appoint a person for a fixed period on contract and after expiry of the contract, he will not be entitled to notice pay or compensation. It will be covered under sec. 2(oo) (bb) of I.D. Act.


Such fixed term workman's hours of work, wages, allowances and other benefits shall not be less than that of a permanent workman; and (b) he shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered.


The provisions under the Industrial Employment (Standing Orders) Act of 1946, under which the rules have been amended to allow fixed-term contracts, are independent statutory provisions, with requirements under any other laws not impacting these, which mean provisions of the Payment of Gratuity Act will not limit the functioning of the Industrial Employment (S.O.) Act.


In sum, workers hired under fixed-term contracts will be entitled for gratuity from employers whenever their contract ends, even if they have not completed five years of continuous service.


Whereas the permanent workers are not entitled to gratuity under the Payment of Gratuity Act unless they complete minimum five years of service to become eligible for gratuity.


In another benefit to workers, the government has said an employer will not be allowed to “convert the posts of the permanent workmen existing in his industrial establishment” as fixed-term employment after notification of the new rules.


The amendment will aid the industry to employ workers in sectors which are of seasonal nature and witness fluctuation of demand and hence requires flexibility in employing worker. Before extending the facility of employing workers on fixed term to all sectors, it was initially introduced in apparel manufacturing sector in industrial employment (S.O.) Act in October 2016.


The amendment further stipulates that a temporary workman who has completed three months of continuous service shall be given two weeks’ notice of the intention to terminate his employment if such termination is not in accordance with the terms of the contract.


In case he has not completed three months of continuous services, he shall be informed for the reasons for termination in writing. It also provides that services of temporary employees shall not be terminated as punishment, unless he has been given an opportunity of explaining the charges of misconduct alleged against him.


As far as impact for this amendment in concerned, it is not going to be much effect on the present employment practices because this kind of employment category already exists and the employers have been appointing the workmen on fixed term since long even before this amendment via having such category in their certified standing orders. However, govt. has put a rider that the present permanent employees cannot be converted in fixed term employees on the demand of unions.


It will be myth this facility will discourage the employers from engaging workers through contractors and will employ directly. It’s expected that contract labour employment will remain an attractive proposition. Now the strength of permanent workmen will not increase and all possible future employment of employees on company roll will be only on fixed term basis.