According to a recent provision made by the Central Government in the Industrial Relations Code 2020, various companies can convert their permanent employees into term contracts. However, such an employee will continue to get all the benefits and comforts that a permanent employee gets.
The new law, which was notified last week, will bring huge relief to companies. Companies will now be able to hire directly for fixed term contract jobs. Previously, companies had to seek the help of contractors for such fixed term contract jobs. Such contractors had to pay a certain remuneration. Companies will now be exempt from these costs.
An employee hired on a fixed term contract will receive the same benefits as a permanent employee. However, when such an employee is laid off, there is no benefit like provident fund or gratuity like a permanent employee.
Earlier in 2018, the Modi government had made a provision that no company can convert a permanent employee into a fixed term contract. There is no such provision in the rule made last week so some industrial units can convert a permanent employee into a fixed term contract. The new rule also does not specify how often a contract can be renewed.
Market experts believe that this rule could lead to a reduction in permanent jobs in the future. This rule is dangerous. Fixed term contract job system is welcome but there should have been certain rules. It is worth noting that fixed term contract jobs were introduced in Europe in the year 2000.