In a landmark reform set to transform India's employment landscape, the central government has announced that four comprehensive Labour Codes will come into force on November 21. This move consolidates and rationalizes 29 existing central labour laws, introducing significant changes, particularly for a new category of workers known as Fixed Term Employees.
What is Fixed Term Employment (FTE)?
The new labour codes formally introduce the concept of Fixed Term Employment (FTE). This framework allows employers to hire workers directly under a fixed-term contract for specific roles and project-based work. Crucially, the government has mandated that these fixed-term employees must be treated on par with permanent, regular workers.
This means FTEs are entitled to all statutory benefits available to permanent staff, including wages, allowances, social security, medical benefits, and paid leave. The Centre stated that this provision "promotes direct hiring and reduces excessive contractualisation" in the workforce, aiming to bring more workers into the formal social security net.
The Major Shift in Gratuity Eligibility
The most impactful change for fixed-term employees revolves around gratuity payments. Gratuity is a lump-sum financial reward paid by an employer to an employee as a gesture of appreciation for long and continuous service.
Previously, the law mandated a minimum service of five years with a single employer for an employee to become eligible for gratuity. This was a significant barrier for contract and fixed-term workers.
Under the new codes, the eligibility threshold for fixed-term employees has been dramatically reduced. FTEs will now be eligible to receive gratuity after completing just one year of service. This is a monumental shift that provides a substantial social security benefit to millions of workers who were previously excluded from this benefit due to the nature of their employment contracts.
A Unified Framework for Worker Welfare
The four codes being implemented are the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020.
Beyond gratuity, the new wage code also stipulates that the calculation base for social security contributions, including provident fund, maternity benefits, and bonus, will be broadened. This means these contributions will be calculated on a larger portion of an employee's pay, potentially increasing the eventual payouts for workers.
This holistic overhaul represents the government's largest step in decades to modernize labour laws, making them more relevant to contemporary work arrangements and extending crucial protections to a wider segment of the Indian workforce.
