Fixed-term employment

Fixed-term employment is engagement of an employee for a defined period rather than until retirement or termination. The four labour codes, brought into force on 21 November 2025, treat a fixed-term employee as a category of its own. Under the Code on Social Security, 2020, a fixed-term employee becomes eligible for gratuity after one year of service, and a period of more than six months but less than a year may be rounded up and counted as an additional year.

The change reverses the reason many companies moved staff to fixed-term contracts, which was to stay below the five-year gratuity trigger. On the illustration in our note of 9 September 2026, a cohort of 300 fixed-term engineers at an average monthly wage of INR 80,000 accrues about INR 1.38 crore of gratuity for a single year of service, a liability that was previously zero. The working-hours limits apply to fixed-term staff in the same way as to others.