Just one in five fixed-term employees (FTEs) gets her contract renewed for a second term, while others become unemployed after the end of the contract tenure, according to a joint report by two government agencies. Fixed term employment, a key labour reform rolled out in phases since 2016, however, has helped both in creating new employment opportunities, formalisation of jobs and improving productivity, the study by the V V Giri National Labour Institute and Indian Institute of Public Administration, showed.
The study relied on responses from industry chambers Ficci, CII, Asocham and PHDCCI.
gHowever, one concern that was also reported (is) that only 20% of the FTE contracts gets renewed, which means that 80% of FTEs either graduate to unemployment or inactivity situation after their contract duration gets over, though many may even graduate to greener pastures or permanent employment,” the study said.
FTE as a new concept of employment was launched first for the apparel manufacturing sector in 2016 and it was then extended to all sectors in 2018.
FTEs allow enterprises to adjust employment with respect to business cycles, reduce the cost of hiring labour and thereby, enhance competitiveness. It is an alternative to contract labour system with a provision of written contract. All statutory benefits on par with permanent employees are available to FTEs.
The FTE contract generally ranges between six months to one year.
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All the four chambers reported that most of their members treat FTE workers at par with permanent workers in terms of provision of wages, working hours, social security and other statutory benefits, thereby negating the popular narrative that introduction of FTEs will result in more informality among the employees,” the study said.
The number of FTEs are on the rise in the country. While only 3% of all new recruitment by the member firms of CII comprised FTEs, nearly half of the all new jobs created by the Ficci members are FTEs.
However, two premier industry associations – CII and Ficci – have expressed their differences on the “sense of belonging” of the FTEs in relation to the organisations they are employed with. While CII finds that FTEs have that sense, Ficci finds it otherwise.
Labour expert K R Shyam Sundar said, “The problem with the FTEs is that on the part of the employer, human capital investment will not take place because the employees’ tenure is rather short. On the other hand, the worker knows she will be employed for limited tenure. Given this mutuality, why should the worker be committed to the firm? Or why should the employer invest on the employees? The sense of belonging will obviously be lower on the part of the employees.”
The threat of termination of contracts may initially lead to higher efficiency on the part of the workers, but this will taper away over medium to long-run, Sundar said.
Trilegal’s Atul Gupta, however, said, “Compared to contract workers, FTEs will have a sense of belonging, because they will be given all the same benefits as employees on open-ended contracts. This will be things like coverage in the company’s insurance policies, same email IDs, uniforms (if used), etc. However, compared to employees on open ended contracts, FTEs may not feel as invested in the long-term growth of the company because they know their tenure is limited.”