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Rules for hiring contract workers may be eased

The National Democratic Alliance (NDA) government at the Centre has proposed to give industries some flexibility in hiring contract workers for project-based jobs or short-term assignments, a move cheered by industry but slammed by trade unions as an entry of 'hire and fire' through the back door.

The proposal, originally mooted by the previous NDA government in 2003, was subsequently scrapped by the United Progressive Alliance (UPA) government in 2007, following pressure from central trade unions. However, the proposal was now back on the table, amid strong demand from industry players, said a labour ministry official.

The Union government has issued draft rules for inviting public comments on amending the Industrial Employment (Standing Orders) Act. Even as five days are left for receiving public feedback (proposals were mooted on April 29 for inviting comments within 45 days), central trade unions seem to lack clarity on the proposals.

According to the draft rules, factories can hire 'fixed-term' workers for a specific time. The benefits they will get and their terms - working hours, wages, allowances, etc - will be the same as those provided to permanent employees. The employer will not have to give the worker any notice period at the end of his job tenure, or when the project is completed.

The move will allow companies to hire workers for short assignments and terminate their services once the project is completed. "Fixed-term employment is needed to execute time-bound projects and short-term contracts where manpower employed could be dispensed with on completion of the project… The category of 'fixed-term employment' may be reintroduced," industry body Ficci had said in its proposal, soon after the NDA government took office in May last year.

While industry is cheering the proposal, the central trade unions are slamming the government for keeping them in the dark.

"One of the biggest challenges before companies today is hiring contract workers. The fear of having to match contract workers' expectations for employing them on a permanent basis deters industry from hiring casual workers which leads to non-creation of employment. The government move in this regard is commendable," says Rituparna Chokrabatory, co-founder & senior vice-president of TeamLease, a staffing firm. She says the new rule will bring clarity on a worker's job duration in his or her appointment letter itself.

Companies, particularly those in construction and mining activities, usually refrain from hiring permanent workers for project-based requirements, as termination requires process of retrenchment under the provisions of the Industrial Disputes Act. This includes giving a notice, payment of compensation, intimation to the government, etc.

The employers will not be mandated to give a notice to a fixed-term worker on non-renewal or expiry of his or her contract. At present, there is no clarity in the Industrial Employment Act on whether there is a need to give a notice when the contract of a temporary worker expires or the employer chooses not to renew the contract.

According to the proposal, in coal mines, workers hired as badli (temporary replacement for permanent workers) or on a temporary basis, will not be given notice on termination of employment. At present, employers need to give a two-week notice for terminating the services of the temporary workers who have completed three months in office. These workers could be fired without written explanations required under the present provisions.

Trade unions have termed the proposal a "backdoor entry" of "hire & fire policies" of the government. "Since the government realised its proposed Industrial Relations Bill, which seeks to ease retrenchment process for employers, will take time to be implemented, it moved to amend the law this way. All future hiring will be on a 'fixed term'. It is strange the proposal has not reached trade unions. We will strongly protest this proposal," said A K Padmanabhan, president of Centre of Indian Trade Unions (Citu).

The government has drafted an industrial relations code to combine three existing laws, with changes to the Industrial Disputes Act, Trade Unions Act and Industrial Employment (Standing Orders) Act. According to a proposal, units with up to 300 workers will be allowed to lay off workers without official sanction. At present, only those factories that have up to 100 workers are allowed to do so.


  • Govt has proposed to allow companies to hire contract workers for short assignments, or on a project basis
  • This proposal was mooted by the previous NDA govt in 2003 and scrapped by the UPA govt in 2007
  • The move will allow companies, especially those in construction or mining, to hire 'fixed-term' workers for a particular time, instead of permanent ones
  • Fixed-term workers will not be given notices at the time of termination of their service or at the end of tenure
  • The fear of having to regularise contract workers deters companies from hiring for the short term

The move will remove ambiguities as the duration of work and project will be clearly said in contract workers' appointment letters

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