Why Fixed-Term Employment is a win-win for the employer and the employee

Ten years ago, when Rajan and Sajid were classmates at ITI, they dreamt of starting a business and creating jobs. Today, they jointly own an electrical equipment manufacturing company in the industrial area, with employee strength of 230 workers, with 30% of them being temporary, not on their pay roll. Their company forms a part of OEM supply chain for Refrigerators, Air Conditioners and Air Coolers. Besides supplying components, few years ago they launched a unit that assembles low-cost coolers and it became an instant hit among several city dwellers.

But , Sajid who looks into the operations, has been facing capacity issues with meeting the demand during summer. With the shortage of full-time workforce, the production line gets affected and they look for contract workers who can keep the assembly line moving during the peak season. However, the quality of contractual workers, theirs skills and productivity has been a great concern since it impacts their revenue. Even though Rajan is willing to pay better wages, he hasn’t been able to attract suitable workers to fulfill the seasonal requirements, despite engaging labour contractors.

Just like Rajan and Sajid, there are many small and medium business owners who compromise with the quality of output and labour issues due mandatory compliance for regularized contract employment and associated overheads. They need flexibility in hiring employees to suit the nature of their business and at the same time, attract quality workforce through standard wages and perks.

How fixed-term employment helps the workforce

The new Labour rules introduced in March 2018 allow companies to hire fixed-term workers on contract for a stipulated period. The fixed-term workers would be entitled to all benefits such as wages, hours of work, allowances and others statutory benefits, on par with permanent workers. As per the new amendment, a contract worker who has completed 3 months of service, would be given 2 weeks notice prior to termination of employment.

Fixed-term employment is a welcome measure as it meets the vagaries of the economy besides benefiting industries that are seasonal in nature. The workers can directly apply for such jobs without depending on the middlemen. This would make the process more transparent and improves the workers’ financial stability, social security and legal documentation of employment and employee benefits.

Payment of ESI and Provident Fund

Just like the full-time employment, the new Labour rules have mandated the payment of ESI and Provident Fund to the fixed-term employees, provided they complete stipulated duration of service. This was a serious issue with the current contractual system where the labour contractors avoided any investment in the welfare of the workers. Now with the entitlement of these benefits, the fixed-term workers stand to gain in terms of financial support to cope up with employment uncertainties.

Banking and digital inclusion

Opening a bank account will not be an option anymore for the contractual workers, since they will be entitled to the benefits and regular pay only if they have a valid bank account. With Aadhaar linked schemes for digital inclusion, it is imperative that they become a part of the organized banking system and depend less on informal and risky monetary transactions. They can also avail the Pradhan Mantri Suraksha Bima Yojana Insurance scheme, thus paving a way for moving into formal sector.

Employment documentation

Contractual workers are at the mercy of their contractors for many reasons. Since their work, job role, pay, skill levels never get recorded on paper, they are at a loss when they need a proof of their work. When the work is certified formally, the workers will find the documents useful in applying for better jobs on their own without the help of middlemen.

With permanence of jobs posing many questions, today we need to re-think traditional notions of employment and accept flexible and temporary jobs as the order of the day. When legalized, fixed term employment will create more jobs; since the industry would adopt it as a means of powering project-based business or seasonal business. They don’t need to circumvent the Labour Laws to meet their requirements, just like Rajan and Sajid who favour extending most of the benefits of full time employment for their contractual workers. They have also realized that, in the long run, it is beneficial for them to attract skilled and experienced workers who are high on productivity to match the demand during the peak season.

Guest Author: Rajesh A R, Livelihoods Enablement Enthusiast and Contributor to the evolving 3E (Education, Employment, Entrepreneurship) system in India.