Are Fixed-Term Contracts Governed by Labor Laws or Just Contract Terms? Seeking Guidance on Leaves and Gratuity

Guidance on Fixed-Term Contracts

I would like to seek your valuable guidance on fixed-term contracts. Kindly suggest whether their service conditions and entitlements are governed by labor laws (Shops and Commercial Establishments Act, Payment of Wages Act, and Payment of Gratuity Act, etc.) or if they are simply guided by the terms and conditions laid down in their respective contracts. I am primarily looking for information regarding leaves, gratuity, and working hours.

Kindly advise.

Regards,
Girish

Understanding Fixed-Term Contract Employees

Fixed-term contract employees are individuals directly employed by the employer for a specified period or a particular project, such as one year or three years, depending on the anticipated duration of the project. They are entitled to all benefits, including ESI, PF, leave with wages, maternity benefits, and even gratuity, provided they have completed five years of service with 240 days of work each year (inclusive of all weekly off days, holidays, and paid leave days).

The key distinction is that, unlike regular workers who require notice and compensation as per the Industrial Disputes Act in the case of retrenchment, fixed-term contract employees do not need to be given advance notice or compensated for retrenchment. Nevertheless, if their employment is terminated before the project or contract period is fulfilled, proper notice should be given.

This issue has been extensively discussed in this forum on numerous occasions. You are encouraged to review the following link: https://www.citehr.com/129000-policy...-employee.html

Regards,
Madhu.T.K

Thanks, Madhu, for your valuable guidance. To close the thread, I would like to ask a specific query regarding gratuity. Kindly suggest how the provision of gratuity would be in case a fixed-term employee dies before the end of the contract. Please suggest:

- Whether dependents will be eligible for the gratuity for the period elapsed and remaining in the contract, or
- Whether dependents will be eligible for the gratuity for 5 years, or
- Whether dependents will be eligible for the gratuity for 20 years, or
- Whether dependents will be eligible for gratuity until the retirement age.

Regards,
Girish

Gratuity Entitlement in Case of Employee Death

In the case of death, the dependent of the deceased employee is entitled to receive gratuity for the period the employee had served in the company without reference to the qualifying service of five years. That is, if the death has occurred after three years, the gratuity will be for three years. This is applicable even in the case of regular employees.

Gratuity paid considering the superannuation date is only an arrangement by the LIC under a scheme wherein the insurance company undertakes to pay gratuity calculated till the date of superannuation in return for an additional premium. This does not imply that the employer who has not taken any gratuity insurance from an insurance company is also obligated to pay the dependent of the deceased employee gratuity calculated till the date of superannuation. Service gratuity is limited to the years served by the deceased in the company.

An establishment that has taken the gratuity insurance scheme shall include the FTC employee with his date of expiry of FTC as the date of superannuation. Since the date of expiry of FTC is the date of retirement, if he dies before that date, he will receive gratuity calculated till that date. Unless otherwise provided, however, the insurers will follow the common policy regarding superannuation, i.e., if the age of superannuation is 58, then all employees will be considered under that age. Since the premium will be determined based on salary, date of birth, and the remaining years to complete the age of superannuation, care should be taken by the employer to ensure that proper instructions are given to the insurance company regarding the termination date of the contract of employment of an FTC employee.

Regards,
Madhu.T.K