What is the difference between a fixed-term and a permanent employment contract in India?

A permanent (or open-ended) contract continues until the employee resigns or is lawfully terminated, while a fixed-term contract is for a defined period that ends automatically on the agreed date without amounting to retrenchment. The key practical distinction is duration and how the engagement ends, not the level of statutory protection.

Importantly, fixed-term employees are entitled to the same wages, hours, allowances, and statutory benefits as permanent employees doing similar work, and under the new labour codes they are eligible for gratuity on a pro-rata basis even without completing five years. This narrows the historical gap between the two categories. Employers using fixed-term contracts must therefore provide equivalent benefits and cannot use the format simply to avoid obligations owed to permanent staff.