Labour Codes and Impact on Fixed Term Employees (FTE) and Contract Workers on Fixed Term Contract (FTC)

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There is quite a confusion between the terms FTE and FTC and many believe the the recent sweeping changes in the Labour Codes, conferring better social securities especially right to gratuity on completion of one year (instead of existing 5 years) and also proportionate eligibility. Hence this piece of article. 

Gratuity for FTC

 Prior to Labour Codes

As per Payment of Gratuity Act, the eligibility criteria for all employees, including fixed term employees (FTC) was 5 years continuous service

Labour Codes Implication (effective 21st November, 2025)

 The Code of Social Security (CoSS) & Industrial Relations Code (IR Code) governs gratuity applicability for both FTEs and FTCs.  

 A. The Code on Social Security

Section 2(34), while defining  fixed term employment, provides that a fixed term employee is eligible for all benefits, under any law for the time being in force, available to a permanent employee proportionately according to the period of service rendered by him even if his period of employment does not extend to the required qualifying period of employment;

As per Section 53 r (d) on termination of his contract period under fixed term employment with a proviso  that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement or expiration of fixed term employment or happening of any such event as may be notified by the Central Government.

Section 53(2) 3rd Proviso, provides  that in the case of fixed term employment or a deceased employee, the employer shall pay gratuity on pro rata basis. 

B. Industrial Relations Code

Section 2(o) ( c) provides that a fixed term employee  shall be eligible for gratuity if he renders service under the contract for a period of one year;

The  FAQs released by the Ministry of Labour & Employment - Central Government

While defining “fixed term employment” the FAQ states that  he shall be eligible for gratuity if he renders service under the contract for a period of one year;

Action recommended 

Review all the Fixed Term Employment contracts and ascertain employees/associates eligible for

Gratuity as illustrated above. Ensure due compliance and in case of any queries, do contact me @

viswanathanvasudevan159@gmail.com, mob.9920780095




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