Difference between Fixed term Employment (FTE), Permanent Employment (PE) & Contract Labour (CL)

We can understand the difference from two angles.

One is Practical and another is Legal.

When it is seen practically, all work in the establishment for long duration doing sometimes same or similar nature of work with few exceptions but with difference in salary and benefits. It is difficult to ascertain the difference by seeing them at workplace but legally there is a difference.

Fixed Term Employment was not defined as category of employment in Industrial Employment S.O. Act, 1946 till 2018 when it was defined in Central Rules of the Act. This category of employment has now also find a place in new Industrial relations Code, 2020 which is an employment based on written contract for a fixed period. Both establishment and employee know beforehand about the tenure of the employment and when it will expire. In this kind of employment there is no 3rd party between establishment and employee.  Such employee employed on fixed term will be on direct payroll of the establishment. For such category, there will be no legal obligation of paying retrenchment compensation on expiry of the contract. However, payment of gratuity is mandatory even if such FTE employee’s tenure of employment is less than 5 years. In other words this category of employment is outside the purview of retrenchment. Law does not prescribe any limit of renewal period. Nature of work is also not specified which means that fixed term employee can work the same and similar kind of work which the permanent employee does.

Permanent Employment is a kind of employment against the permanent vacancy in the establishment which is filled by establishment. Such person on permanent post can not be terminated like person employed on fixed term. Permanent employee either can be retired on attaining the age of retirement as agreed in terms of employment or service rules, or retrenched after compliance of related provisions of and Industrial Disputes Act, 1947 or dismissed if found guilty of misconduct after completing Disciplinary Proceedings and compliance under Industrial employment SO Act, 1946. Such persons are employed for permanent nature of work.

Contract Labour is a category of employment in the establishment which is employed by the 3rd Party i.e. Contractor and not by the establishment directly but for the work of the establishment under a contract executed between establishment and contractor. Such employees are not on the roll of the establishment. They are appointed, paid, terminated by the contractor and not by the establishment. Also the control and supervision on the work accomplished by such contract labour in the establishment remains with the contractor. They can be paid lessor wages (subject to payment of minimum wages) as compared to on roll employees. Such employment of contract labour can be prohibited by the appropriate Government in any process of any industry, if govt considers that such contract labourers are engaged in perennial nature of the work of the establishment. If the contract is not sham and is genuine and fair and observing all compliance and rendering all applicable benefits to its contract labour, then such labour engagement can be continued for years together legally.

 

 

By Dayanand N. Mangaonkar