Treating the symptoms

The trend of fixed-term employment is growing. Owing to strict employment law provisions, companies have been resorting to fixed-term contract employment over the last couple of decades.

The positive side of this is that contractual jobs can be a pathway from unemployment to employment. However, the flip side of it is that engaging in too many such contracts may lead to lower employment stability, as workers will have to re-market themselves. Companies also lose the advantage of trained employees.

Indian laws provide for various kinds of employment, such as regular, fixed-term, outsourced, daily wagers, casual, temporary, etc. Similar to the US, which has at-will employment, fixed-term contracts are the only arrangement under Indian laws that allow employers to specify a duration after which the worker can be let go according to the terms of the contract. In contrast, permanent contracts have a duration until retirement, and firing such workers mandates following procedures, which are cumbersome and expensive.

Pre-determined contracts are quite prevalent in seasonal and project-based employment, and sometimes to meet the fluctuations of demand, temporary pressure of work, etc. In fact, now most companies, as a usual practice over the last few decades, enter into fixed-term employments even in normal courses owing to complex termination laws. For instance, retrenchment and closure laws according to the Industrial Disputes Act, 1947, require payment of retrenchment compensation, notice pay as well as a nod from the government if the industrial unit has more than 100 workers. This permission is granted in the rarest of rare cases. Fixed-term contracts are an exception to retrenchment. In other words, if the contract of employment is for a specified term, provisions of retrenchment need not be complied with, and termination can be done according to the terms of the contract. Interestingly, Uttar Pradesh is the only state wherein Section 2(oo)(bb) of the ID Act, which is an exception provision to compliance with retrenchment, does not exist. Thus, in UP, even if an employee is hired as a fixed-term employee, he would be treated like any other permanent employee for the purposes of retrenchment or closure, etc.

As a middle path, the legislature may consider making laws regulating fixed-duration employment. For example, pay scales could be made higher, and at the same time, companies could be given ease from regularization claims. These are everyday grey areas in our laws that need coverage.

Many foreign jurisdictions limit either the total length of time that an employee may work under a set duration employment contract or the number of extensions that may be done. However, India's basic problem is its population. But there is also a positive side to our massive population, which is that we have a vast workforce through which we can cater to the world. As pointed out earlier, what we need is appropriate training, education, and skills. Engagements in fixed duration employment up to a certain number of years, especially for younger generation employees, can be a solution to this.

Pre-arranged contracts are to be drafted according to requirements. The date of commencement and termination must be mentioned. It is advisable that the number of times the contract is renewed should be reasonable. A clause may be included that even during the contract period, it can be terminated by either party, upon serving the required notice/notice period. Provisions such as Minimum Wages, Provident Fund, Employees' State Insurance, etc. need to be complied with for fixed-term employees, according to applicability. In case such contracts are continued for years or are renewed several times, with artificial breaks in between, courts have the power to term it as camouflage or sham. Since such usages of fixed-term employment are prevalent, the New Labour Codes, which are yet to be implemented, mention gratuity to be paid to fixed-term employees merely on completion of one year of service, though for regular employees, it is on completion of five years.

While securing the interests of employees under fixed-term employment arrangement is stressed upon, it is also vital to note that there is a glaring gap in Indian laws when it comes to dealing with employees abruptly ending the contract or not serving the due notice period.

This trend takes a toll on the productivity of the organisation that might have already invested considerable time and resources in the particular employee — only to be left ditched without any well-established legal recourse.

There should be well-defined compensatory provisions in case of breach of the contract by the employee, followed by measures to ensure implementation of the same.

With the current economic structure, it is desirable that the Legislature focuses on amending archaic labour laws. Contractual and casual employees are a good option for companies when they need to stay flexible. But such contracts cannot replace the need for permanent workers in the industries. At the same time, there is a need to look into and address the concerns that nudge employers to resort to excessive use of fixed-term employment arrangements. Unless these concerns are dealt with, a balanced solution will remain elusive. Changes in labour laws are essential to make the country an industrial hub. There should be elasticity given to businesses in hiring and letting go in complex circumstances, by amending provisions, to avoid short-term arrangements. At the same time, job security and the satisfaction of employees should also be maintained.

The writer is a practising Advocate in Supreme Court and High Court of Delhi. Views expressed are personal