India’s new Labour Codes have reshaped the way organisations hire, classify, and manage their workforce. One of the most significant reforms is the formal recognition of Fixed Term Employees, a category that now enjoys near-complete parity with permanent staff—including gratuity eligibility after just one year of service, as highlighted in recent labour code analyses. With businesses increasingly relying on flexible staffing models, understanding who qualifies as a fixed term employee under the new legal framework is essential for HR teams, compliance officers, and employers navigating India’s evolving labour landscape.
1. Statutory Definition Under the Labour Codes
The concept of “Fixed Term Employment” is formally defined in:
- Industrial Relations Code, 2020 (IRC) – Section 2(o)
- Code on Social Security, 2020 (CSS) – Section 2(34)
Across both Codes, a Fixed Term Employee (FTE) is someone:
- Hired directly by the employer,
- Under a written contract,
- For a specific, pre-determined duration,
- Whose employment automatically ends when the contract expires.
This definition is not merely descriptive, it determines eligibility for benefits, termination rules, and employer obligations.
2. Core Criteria: Who Legally Qualifies as a Fixed Term Employee?
A person counts as a Fixed Term Employee under the new Labour Codes only when all of the following conditions are met:
a) A Written Contract Clearly Mentioning “Fixed Term Employment”
The contract must specify:
- Start date
- End date or total duration
- Nature of engagement as “Fixed Term”
- Renewal terms (if any)
Without a written contract, the engagement cannot be treated as fixed term.
b) Tenure Must Be Pre-Defined and Not Open-Ended
The employee must know at the time of joining when the employment will end.
Examples of valid tenure formats:
- “12-month fixed term contract”
- “Contract valid from 1 April 2025 to 31 March 2026”
- “Project-based role ending on 30 September 2025”
Ambiguous phrases like “till project completion” may not qualify unless the end date is reasonably ascertainable.
c) Direct Employment by the Principal Employer
Fixed term employees are not contract labour.
They must be:
- On the employer’s payroll
- Under the employer’s supervision and control
- Receiving wages directly from the employer
This distinction is crucial for compliance and litigation risk.
d) Must Fall Within the Definition of “Worker” or “Employee”
The Labour Codes classify individuals based on:
- Nature of duties
- Level of supervision
- Managerial vs. non-managerial responsibilities
Most operational, technical, clerical, and service roles qualify.
Very senior managerial roles may fall outside certain protections, even if hired for a fixed term.
3. What the New Labour Codes Change for Fixed Term Employees
The new Labour Codes significantly elevate the status of fixed term employees.
a) Benefit Parity With Permanent Employees
According to labour code summaries and news reports, fixed term employees now receive the same statutory benefits as permanent employees doing similar work, on a pro-rata basis.
This includes:
- Wages
- Leave
- Working hours
- Social security
- Medical benefits
- Safety and welfare provisions
This reform aims to prevent misuse of fixed term contracts to deny benefits.
b) Gratuity Eligibility After One Year
One of the most widely reported reforms is that fixed term employees become eligible for gratuity after completing one year of service, even without completing five years.
This is a major shift from the earlier regime and encourages fair treatment of short-tenure employees.
c) Mandatory Appointment Letters
The new Codes require employers to issue formal appointment letters to all employees, including fixed term hires.
This improves documentation and reduces disputes.
4. Who Does Not Count as a Fixed Term Employee?
A person does not qualify as a fixed term employee if:
- There is no written contract
- The tenure is unclear or indefinite
- They are hired through a contractor
- They are repeatedly re-hired on back-to-back fixed term contracts to avoid permanency (courts may treat them as permanent)
- Their role falls outside the statutory definition of “worker/employee”
Misclassification can lead to compliance penalties and litigation.
5. Fixed Term vs Permanent vs Contract Labour: Key Differences
| Category | Tenure | Employer Relationship | Benefits | Termination Rules |
| Fixed Term Employee | Pre-defined | Direct | Full parity (pro-rata) | Ends automatically on expiry |
| Permanent Employee | Indefinite | Direct | Full | Requires retrenchment process |
| Contract Labour | Variable | Contractor | Limited | Contractor responsible |
This table helps HR teams and consultants classify roles correctly.
6. Compliance Checklist for Employers
To ensure a worker is legally recognized as a fixed term employee:
- Draft a clear fixed term contract
- Mention start and end dates
- Provide benefit parity as required by the Codes
- Register the employee under EPF/ESI where applicable
- Issue a formal appointment letter
- Avoid repeated renewals that mimic permanent employment
This protects both the employer and the employee.
Conclusion
A Fixed Term Employee under India’s new Labour Codes is someone hired directly, in writing, and for a clearly defined duration, with full access to statutory benefits—including gratuity after one year, as confirmed by labour code coverage and policy analysis.
For employers, this category offers flexibility without compromising compliance. For employees, it ensures fairness, protection, and access to benefits previously unavailable to short-term hires.
Join the Conversation
Your thoughts matter. Share your perspective in the comments—healthy dialogue helps us all understand labour law better.
Need Guidance?
Feel free to book a consultation. Expert advice can make compliance smoother and more effective.
Spread the Knowledge
If you found this article useful, don’t keep it to yourself—share it with colleagues, friends, or on social media. Together, we can build greater awareness of labour rights and responsibilities.