Fixed-Term Employment: Can We Hire Employees for Just One Year?

Dear Friend,

Can we appoint employees for a fixed term of one year? Please advise.

D. V. Gosavi

Hi,

I think you can appoint candidates on a contractual basis for 1 year. However, I would suggest that you hire candidates through external temporary staffing agencies.

Thanks

Dear Friend,

"Any agreement which is enforceable by law is a legal contract," and a service contract is one type of contract that, if enforceable by law, is legal.

Regards

Guys,

You can appoint a person on a fixed-term contract of 1 year. But please remember, as per the Contract Act, any person employed with the organization for more than 180 days is deemed to be a permanent employee. Hence, try to break the contract before 180 days and then recruit him, giving a gap of 5 to 7 days. Don't let the cap of 180 days cross; otherwise, if challenged in the court of law, he is deemed to be a permanent employee. Hope you guys are clear on this.

Dear Gaggan Sahni ji,

Please go through the post linked below; your doubts will be clarified:

https://www.citehr.com/114628-contra...tml#post467874

Regards

Hi,

Thanks for the update. Firstly, by mistake, I mentioned 180 days instead of 240 days. Secondly, judgments differ from case to case. The court takes all aspects into consideration while giving the judgment. There have been cases where courts have recognized 240 days as moral grounds for confirmation. Hence, exceptions are everywhere. Your update surely has a strong point to be contested.

The law permits fixed-term contracts, and if you renew the fixed-term contract on expiry, it clearly means that a permanent vacancy exists within the organization, and you are intentionally not filling it up. Hence, on renewal, one must be careful. I have checked with my lawyer, and he also says the same thing about the 240-day cap. I think we need to reassess this from the current scenario.

Dear Kuljit,

Please refer to the following link: [judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k](judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k).

Thank you.

Dear Kuljit,

Please refer to the following link: [judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k](judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k).

In this case, Supreme

Dear Kuljit,

Please refer to the following link: [judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k](judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k).

In this case, the Supreme Court has directed that if a period exceeds 240 days, it is deemed to be permanent.

Dear Kuljit,

Please refer to the following link: [judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k](judis.nic.in/supremecourt/qrydisp.asp?tfnm=29780 - 37k).

In this case, the Supreme Court has directed that if an employment exceeds 240 days, the individual is deemed to be a permanent employee.

Dear Gaggan,

As you rightly said, the facts and circumstances of each case are different, and courts consider the facts and circumstances before deciding the issue. I have noted one full bench judgment in the case you made reference to, and the ratio of the same is: "Merely because a temporary employee or a casual wage worker was continued for a time beyond the term of his appointment, he would not be entitled to be absorbed in regular service or made permanent—Due to long service, an ad hoc employee did not acquire any right to permanent appointment."

One more thing I would like to point out is that the judgments we are both referring to have "public employment" in issue. If possible, try to find out the judgment where employment in a private entity is at issue. I am also trying to find the same.

With regards and thanks.

Dear Friends,

Thanks for valuable information. I would like to add one more thing here. In Maharashtra, there is an Act named MRTU & PULP Act which deals with various UNFAIR LABOUR PRACTICES on the part of EMPLOYER, TRADE UNION & EMPLOYEE. According to this Act, we can't employ temporary personnel for a vacancy of permanent nature, be it a worker or staff.

D V Gosavi
Nasik, Maharashtra.

Team,

Employees taken under the Fixed Term contract cannot claim permanency since they have accepted the employment knowing their contract will expire on a fixed date. In this case, they have no right to claim permanency. Additionally, the 180/240 days rule is not applicable for permanency in this case. There was a judgment given by Karnataka HC sometime during 2006.

Regards,
Suresh Ramalingam

Dear Friends,

There has been a recent amendment (1 to 2 years ago) in the Standing Orders Act approving fixed-term contracts as a legal form of employment. I request you to review the amendments to the Standing Orders Act. It approves fixed-term contracts with the following terms:

1. It is restricted to a project / short tenure job.
2. Salary and other benefits should not be lower than those given to regular employees.
3. The respective provision needs to be incorporated into the Standing Orders.

Dhaval Shah

Hi,

Yes, you can appoint on a fixed term for a year. Such contracts are legal and expire with the passage of time. Please refer to the ID Act 1947, Section 2 (oo) (bb). Check your state act for this or any analogous provision. Please note that it doesn't apply in Uttar Pradesh as the UP Industrial Disputes Act has no such analogous provision.

Thanks,
Mohan.

Hi,

We have a similar system at our company, but in this case, you need to clearly state that the employee is appointed purely on the basis of contractual terms, and the said contract will expire on completion of the mentioned term period. Alternatively, you can hire an employee as a consultant/freelancer for special services. In this scenario, you would need to ask the employee to prepare a bill of his work for the month, sign it, and make payments based on that. This is the safest way.

However, as an HR professional with ethics and principles, I do not agree with such systems, as I have already communicated to my management (even if they did not agree). These systems tend to take advantage of employees or deceive them. The second approach mentioned above is acceptable when the person is retired and looking to save on taxes, and I support that.

Regards,
Meghal

Dear Meghal and all,

Can we appoint an employee on a fixed-term contract without giving him any statutory benefits (PF, etc.)?

Surendra

Hi,

The model Standing Orders make a provision in the "Rules" to provide for 'fixed-term employees'. This provision can be included in the certified Standing Orders of the company by following the procedure of consultation/agreement with the Unions.

As per the above provision, a person appointed on a fixed-term basis should be paid the wages/salary that is being paid to the permanent employee (minimum of the scale). On the expiry of the contract, the employee will be entitled to pro-rata gratuity, even if he has not completed five years of the eligibility period.

In the normal course also, a person can be appointed on contractual terms for a specific period. The period of employment comes to an end on the expiry of the term.

Cyril

As an employer, you have every right to appoint a person for a fixed period. However, you must have justifiable reasons to appoint them for that period. It squarely falls under Section 2 (bb) of the Industrial Disputes Act - non-renewal of contract.

Dear Surendra,

You can appoint a person for a fixed term, and no PF is necessary if you fix his salary at more than $6,500 per month.

Dear Friends,

An important point in fixed-term employment is that you should have an enabling clause in the terms of your employment stating that:
- the employment is for a specific period.
- the employment expires automatically at the end of the specific period.

Hi!

By three ways, we can recruit a person for a fixed period:

1. Service agreement
2. Contract agreement
3. Hiring from an outsourcing agency, so the candidate will not be on the company's payroll.

All three possibilities are legal as we are using them in our software development company.

Regards,
Richa Kumar