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Fixed-term contract staff to get gratuity benefits like permanent employees

Under the Gratuity Act of 1972, employees completing five years of continuous service are eligible to get a gratuity payment when they leave the organisation

Somesh Jha  |  New Delhi 

Gratuity. Illustration by Binay Sinha
Gratuity. Illustration by Binay Sinha

In a first, workers hired under fixed-term contracts will be entitled to at any time of leaving the job.

Till now, no one hired on a contract for a fixed period was entitled to any Those in permanent employment were entitled to it only after they had completed five years.

Under recently notified rules, workers hired through a will get all the statutory benefits that permanent workers in the same establishment are entitled to. This includes employees’ provident fund and employees’ state insurance benefits, bonus, and other compensation in case of accidents or death while at work.

Under the Act of 1972, employees completing five years of continuous service are eligible to get a payment when they leave the organisation. Last week, the Union government notified the Industrial Employment (Standing Orders) Central (Amendment) Rules. It may be noted that the term ‘industrial’ here covers all those in service establishments, too, with a workforce of at least 10 or more.

These new rules allow hiring of industrial workers on fixed-term contracts; this category did not formally exist in the rules till now. The rules now say all such workers would be “eligible for all statutory benefits available to a 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”.

On seeking legal opinion, the law ministry informed its labour and employment counterpart that provisions under the Industrial Employment (Standing Orders) Act of 1946, under which the rules had been issued for allowing fixed-term contracts, are independent statutory provisions, with requirements under any other laws not impacting these.

“The Industrial Employment (Standing Orders) Act is independent and its provisions will also be interpreted independently. So, provisions of the Payment of Act will not limit the functioning of the (former) Act,” the law ministry decided. It also cited the Constitution’s directive principles under Article 43 in this regard, saying “benefits provided to any class of workers will be seen as a pragmatic step furthering the constitutional goal”.

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

Something permanent workers are also not entitled to, under present law. They have to complete at least five years of continuous service before becoming eligible for

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.

“This means the establishment will not be allowed to reduce the existing posts meant for permanent workers. This has been done to remove all apprehensions from trade unions that all permanent jobs will be converted into fixed-term contracts,” said a senior labour and employment ministry official.

First Published: Fri, March 23 2018. 00:19 IST