India’s sweeping labour reforms—consolidated into four comprehensive Labour Codes on wages, industrial relations, social security, and occupational safety—are redefining how organisations structure their workforces. For decades, employers operated within a complex web of legacy laws; the new framework simplifies compliance and introduces clearer, more uniform protections for workers. One of the most significant shifts is the elevation of fixed-term employment from a marginal practice to a fully formalised mode of work, offering benefits nearly identical to those available to permanent staff.
Fixed-term contracts gain new legitimacy
Under the new codes, employees hired on fixed-term agreements are entitled to equal pay, leave benefits, medical coverage, social security contributions such as PF and ESIC, bonuses, maternity benefits, and even gratuity after completing one year of service. These contracts must be explicit about job expectations, schedules, overtime rules, performance requirements, workplace standards, and exit procedures. In effect, the model blends flexibility for employers with comprehensive protection for workers.
This change strengthens workforce stability without undermining organisational agility. Industries with seasonal, project-based, or specialised skill demands—ranging from technology and manufacturing to retail, logistics, and global capability centres—are expected to increase their use of fixed-term roles. Permanent employment will remain essential for core and strategic positions, but fixed-term hiring is poised to expand meaningfully.
A structural shift, not a move away from full-time work
Human resource leaders agree that fixed-term employment will grow, but not at the expense of permanent roles. Ashish Dhawan of AIMS International notes that every major change in labour regulation compels companies to re-examine their workforce mix. Compliance obligations and cost structures may push organisations to diversify hiring, but employee preferences remain strongly anchored in long-term stability and social security benefits.
In his view, India’s deep-rooted preference for job continuity ensures that full-time employment will continue to dominate. Younger workers may increasingly prioritise flexibility and higher take-home pay, but on the whole, the market is still conservative. Dhawan anticipates only a measured increase in fixed-term and project-based hiring, driven mainly by business needs rather than a strategic shift away from permanent staffing.
R P Yadav of Genius HRTech echoes this assessment. With clearer rules for PF, gratuity, and benefit eligibility, he believes fixed-term hiring will become more responsible and compliant—but not a replacement for permanent hiring. Instead, organisations will benefit from improved documentation, predictable wage structures, and greater transparency across employment categories.
Salary structures move toward standardisation
One of the immediate effects of the new framework is the recalibration of compensation models. The codes require that at least 50 percent of total compensation be structured as basic wages, increasing contributions to social security and limiting the use of variable allowances for cost optimisation. Dhawan expects this shift to raise total CTC figures while reducing purely cash components. Variable pay may grow, but salary design will become more standardised and less discretionary.
Yadav points out that these changes will strengthen long-term financial security, especially for workers earning between Rs 1 lakh and Rs 2 lakh monthly, who will see the most pronounced impact of the mandated gratuity rules.
HR operations undergo major redesign
Implementing the new provisions for fixed-term employees will require significant system-level adjustments. Payroll platforms must be updated to automatically compute entitlement-linked benefits for both permanent and fixed-term staff. Employment letters, HR policies, and compliance documentation must be revised for clearer definitions of tenure, benefit eligibility, and statutory obligations. With gratuity payable after one year, Dhawan anticipates wider use of 9–11 month contracts, prompting HR teams to maintain strict compliance calendars and documentation trails.
Neesu Sharma of Corporate Infotech emphasises that HR technology providers will need substantial upgrades to accommodate the revised employee classifications and benefit calculations. The scale of transformation will depend largely on how rigorously enforcement agencies implement the new frameworks.
Permanent jobs remain secure despite expanding contract work
Sharma stresses that the objective of the Labour Codes is not to reduce permanent hiring but to extend social protections to fixed-term and gig-like roles. Most organisations already comply with regulations covering permanent staff; therefore, the codes simply expand the umbrella of protection rather than incentivise replacement of full-time positions. Frontline and blue-collar workers stand to benefit significantly from better-defined wage floors and consistent full-and-final settlement procedures.
Toward a more transparent and balanced labour market
Across expert perspectives, a consistent theme emerges: the Labour Codes are building a labour market that is more flexible for employers yet more equitable for employees. Fixed-term roles now come with defined entitlements, while salary structures grow more transparent and HR systems evolve to support stronger compliance. The reforms align closely with India’s broader transition toward a formal, regulated, and inclusive workforce ecosystem.
The bottom line
India’s new Labour Codes are not designed to replace permanent work with fixed-term contracts. Rather, they modernise employment frameworks, introduce clarity into compensation practices, and extend long-overdue social security coverage to millions. As organisations adapt, the country is set to benefit from a more balanced approach to workforce planning—one where permanent and fixed-term roles coexist, each serving distinct strategic needs. In this new environment, fixed-term employment emerges not as a substitute but as a fully credible, transparent, and protected form of work.
