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The Union government has issued a draft notification to allow all businesses to offer fixed-term contracts to workers.
This will enable industries to hire workers for short-term assignments and terminate their services once the projects are completed. The Labour and Employment Ministry brought back the proposal, junked earlier last year, after receiving a demand from various quarters of the industry, especially food processing and leather sectors.
The government had allowed fixed-term employment only for apparel manufacturing sector so far and had proposed to extend it to footwear, leather, and accessories sector workers in a decision taken by the Union Cabinet recently. The government had said that the move would help "attract large-scale investments at a global scale".
Under fixed-term employment, workers are entitled to all statutory benefits available to a permanent worker in the same factory. The benefits include the same working hours, wages, and allowances. However, employers may not give notice to a fixed-term worker on non-renewal or expiry of his or her contract. Additionally, the employers are not mandated to provide retrenchment benefits to workers hired on fixed-term contracts.
The move will enable employers to hire workers directly from the market without mediation by a contractor that poses a big hurdle for both industries and employees, a labour ministry official said.
"A fixed-term employment is a workman who has been engaged on the basis of the contract of employment for a fixed-term," as per the proposed Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, dated January 8. It said that workers hired on fixed-term contract should be eligible for all statutory benefits "proportionately according to the period of service rendered" by the worker.
"At present, the contract labour has to be hired by contractors and apart from devoid the contract worker from all facilities that a permanent worker enjoys, they are also paid low as contractor charges a fee," said M S Unnikrishnan, Chairman of Confederation of Indian Industry (CII)'s National Committee on Industrial Relations.
However, central trade unions said it would oppose the move, as the government did not hold consultations before bringing out the draft rules. "The government cannot have varying definitions of a worker. Moreover, without consultations, the government cannot bring changes to labour law. In fact, every worker should be given a permanent status after two years of continuous employment," said Bharatiya Mazdoor Sangh president Saji Narayanan.
However, government officials said that the Industrial Disputes Act 1947 always had allowed provisions for fixed-term employment but it was not "explicitly mentioned" in other rules and regulations definition the working conditions and other employment-related benefits.
"The measure will have more implications for the export sector rather than domestic manufacturing since continued demand and seasonal spikes in orders ensure that manufacturing continues for 10 months every year on an average," Rahul Mehta, President of Clothing Manufacturers Association of India and Managing Director of Creative Group said.
The industry would also be watching the government's decision to extend statutory benefits currently accorded to permanent employees such as similar wages and working hours to fixed-term employees as well. Mehta pointed out certain unique challenges and said providing provident fund benefits to a person hired for a couple of months is not only cumbersome, it may also dissuade employees from taking up a job where his in-hand salary is reduced.
The NDA government had mooted allowing fixed-term contracts for employment in April 2015 by issuing draft rules to amend the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2015. However, Bandaru Dattatreya, who was then labour and employment minister, had shelved the proposal last year after strong opposition from trade unions.