Hi All, Please advise if a company should keep employees on contract or permanent roles. What are the pros and cons? Thanks
From India
From India
If the role is permanent why should an employee be kept on temporary or fixed term contract terms? In some cases, the position may not exist after the project is over, and in such scenario we can go for FTC employment. But positions in Accounts, Administration, HR, Sales etc are more or less required so long as the operations of the company exist. Therefore, it is the role which will decide whether to offer FTC employment or regular employment.
In the case of regular employment also you can fix a probation period, say 6 months or one year. If the employee is not contributing, you can take a call whether to confirm him or not. This period is more than sufficient for you to evaluate an employee.
In the case of persons with managerial roles, it is fine if you do not offer FTC employment. This is due to various reasons. One, the employability of senior management persons may be high and you may not be able to get resources if you offer FTC employment to them. Second, a manager can be asked to go even if he is confirmed in service by giving whatever notice is there under the appointment order. He may not challenge the decision of the management because he will not get the protection of Industrial Disputes Act. If the New labour Code is enforced (please read it as if it is enforced) then FTC employees will be entitled to get gratuity if the contract is not renewed. If a manager is given FTC, and if his contract is not renewed and he is asked to go, you should give him gratuity for the period he had worked with you. At the same time, if he is under a regular roles, and if he is not upto your expectations, you can just ask him to go by giving one or two months notice as per the appointment order. He will remain with you during the notice period, will complete the knowledge sharing or handing over and then will get relieved. No compensation, no gratuity (provided the length of service is less than 5 years)
At the same time, an employee not having any managerial functions to do may be given FTC employment. FTC will be more flexible. Even if you have to pay gratuity for the service period, since it is legally allowed to terminate the contract on the expiry of the fixed term prefixed, you will not end up in troubles of retrenchment clauses of ID Act (Industrial Relations Code- PROPOSED)
From India, Kannur
4206In the case of regular employment also you can fix a probation period, say 6 months or one year. If the employee is not contributing, you can take a call whether to confirm him or not. This period is more than sufficient for you to evaluate an employee.
In the case of persons with managerial roles, it is fine if you do not offer FTC employment. This is due to various reasons. One, the employability of senior management persons may be high and you may not be able to get resources if you offer FTC employment to them. Second, a manager can be asked to go even if he is confirmed in service by giving whatever notice is there under the appointment order. He may not challenge the decision of the management because he will not get the protection of Industrial Disputes Act. If the New labour Code is enforced (please read it as if it is enforced) then FTC employees will be entitled to get gratuity if the contract is not renewed. If a manager is given FTC, and if his contract is not renewed and he is asked to go, you should give him gratuity for the period he had worked with you. At the same time, if he is under a regular roles, and if he is not upto your expectations, you can just ask him to go by giving one or two months notice as per the appointment order. He will remain with you during the notice period, will complete the knowledge sharing or handing over and then will get relieved. No compensation, no gratuity (provided the length of service is less than 5 years)
At the same time, an employee not having any managerial functions to do may be given FTC employment. FTC will be more flexible. Even if you have to pay gratuity for the service period, since it is legally allowed to terminate the contract on the expiry of the fixed term prefixed, you will not end up in troubles of retrenchment clauses of ID Act (Industrial Relations Code- PROPOSED)
From India, Kannur
Both have pros and cons. Usual practice in organizations are non core activities ( though perennial in nature ) - security, cleaners, gardeners, helpers, office boy, loading & unloading etc. are contractual. Whereas for core activities - operators, maintenance, QC, Sales, Purchase, HR etc. are permanent employees.
The above rule random vary between organizations to organizations. It is also depends on type of business/ activities of the organizations.
Cost of engagement of contractual employees is obviously less than permanent employees. My personal suggestion to engage permanent employees where ever it is possible to increase more ownership amongst the employees.
S K Bandyopadhyay ( WB, Howrah )
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs.in
www.usdhrs.in
From India, New Delhi
The above rule random vary between organizations to organizations. It is also depends on type of business/ activities of the organizations.
Cost of engagement of contractual employees is obviously less than permanent employees. My personal suggestion to engage permanent employees where ever it is possible to increase more ownership amongst the employees.
S K Bandyopadhyay ( WB, Howrah )
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs.in
www.usdhrs.in
From India, New Delhi
Dear Shweta-Masson,
This is an important decision that warrants careful deliberation, as it can have significant implications for a company's workforce, operational flexibility, and long-term stability.
In evaluating the pros and cons of contract versus permanent employment, there are several critical factors to weigh. On the one hand, contract employees can provide organizations with greater agility to scale their workforce up or down in response to fluctuating business demands. This can be particularly advantageous in dynamic or cyclical industries, where the ability to rapidly adapt the size of the labour force is crucial. Additionally, contract workers may offer specialized expertise for short-term projects or initiatives, without the long-term commitment required for permanent hires.
Conversely, permanent employees can bring a sense of loyalty, continuity, and deep institutional knowledge to an organization. By investing in the professional development and long-term growth of a core team, companies can foster a stronger, more cohesive organizational culture and benefit from the accumulated experience and skills of their workforce. Permanent roles also tend to attract top talent who value job security and the opportunity for career progression within the firm.
Ultimately, the optimal mix of contract and permanent employees will depend on the unique characteristics and strategic objectives of your organization. Factors such as your industry, business model, growth trajectory, and competitive landscape should all inform this decision. It may be beneficial to conduct a thorough analysis of your current and projected staffing needs, as well as bench marking against industry best practices, to determine the right balance that will enable your company to thrive in the long run.
Best regards,
From India, Bangalore
This is an important decision that warrants careful deliberation, as it can have significant implications for a company's workforce, operational flexibility, and long-term stability.
In evaluating the pros and cons of contract versus permanent employment, there are several critical factors to weigh. On the one hand, contract employees can provide organizations with greater agility to scale their workforce up or down in response to fluctuating business demands. This can be particularly advantageous in dynamic or cyclical industries, where the ability to rapidly adapt the size of the labour force is crucial. Additionally, contract workers may offer specialized expertise for short-term projects or initiatives, without the long-term commitment required for permanent hires.
Conversely, permanent employees can bring a sense of loyalty, continuity, and deep institutional knowledge to an organization. By investing in the professional development and long-term growth of a core team, companies can foster a stronger, more cohesive organizational culture and benefit from the accumulated experience and skills of their workforce. Permanent roles also tend to attract top talent who value job security and the opportunity for career progression within the firm.
Ultimately, the optimal mix of contract and permanent employees will depend on the unique characteristics and strategic objectives of your organization. Factors such as your industry, business model, growth trajectory, and competitive landscape should all inform this decision. It may be beneficial to conduct a thorough analysis of your current and projected staffing needs, as well as bench marking against industry best practices, to determine the right balance that will enable your company to thrive in the long run.
Best regards,
From India, Bangalore
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