75% of Indian Companies are Switching to Fixed-Term Hiring in 2026

The implementation of India’s four new labour codes is driving a fundamental shift in how corporations are hiring their talent.

According to a new report by Genius HRTech, nearly 75% of companies expect a significant rise in structured fixed-term employment (FTE) as they align their hiring strategies with the historic reforms that took effect in November 2025.

The Rise of the “Middle Path” Hiring

The report, based on a survey of over 1,400 companies in early 2026, reveals that fixed-term employment is becoming the “middle path” for India Inc.

By hiring directly on a fixed-term basis, businesses gain the flexibility to scale for specific projects while moving away from the “informality” of traditional contract labour.

Under the new Industrial Relations Code and Social Security Code, fixed-term employees are now legally recognized and granted parity with permanent staff.

This means they are entitled to the same wages, working hours, and social security benefits—such as EPF and ESIC—as their permanent counterparts for similar work.

A Game-Changer for Gratuity and Benefits

One of the most significant shifts highlighted in the report is the revised eligibility for gratuity.

Previously, employees required five years of continuous service to qualify for gratuity.

The new codes have slashed this requirement for fixed-term workers to just one year of service, payable on a pro-rata basis.

Experts expect this change to drive higher adoption of 12-to-36-month contracts, particularly in sectors like IT, manufacturing, and healthcare.

However, while 60% of organizations view these codes as a powerful enabler of formalization, a “readiness gap” remains.

Only 40% of companies report that they have fully prepared for the required operational shifts, such as recalibrating payroll systems to meet the new 50% basic wage rule.

Focus on Formalization and Compliance

The shift toward FTE signals a decisive move toward a more documented and compliant workforce.

By bringing “gig” and “contractual” styles of work under a formal legal umbrella, the codes aim to increase India’s formal employment rate.

Experts suggest that while permanent roles will remain the bedrock of the economy, the transparency of the FTE model will reduce legal disputes and build greater trust between employers and the high-skill talent pool.

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