Quick answer: A permanent employee is someone hired with no fixed end date, who stays employed until they resign, retire or are lawfully dismissed. In India, permanent staff get the full statutory package. That means EPF, leave, statutory bonus where eligible, and gratuity after five years of continuous service under the Code on Social Security, 2020.
- Every new hire must receive an appointment letter under section 6(1)(f) of the OSH Code.
- Permanent staff qualify for gratuity after five years, while fixed-term staff qualify after one.
- Retirement age under the Model Standing Orders, 2026 is 58 unless agreed otherwise in writing.
- Monthly wages are due before the 7th of the following month under the Code on Wages.
What makes an employee permanent in India?
Two things. An open-ended contract, and a completed probation. The Model Standing Orders, 2026 list “permanent” as one of seven worker categories, alongside probationer, fixed-term and casual.
Most offer letters set a probation period first. Once it ends, by confirmation letter or by the terms of the contract, the person is confirmed. No statute fixes the probation length. It comes from your contract and policy, as our note on probation under an EOR explains.
The difference from a fixed-term worker is the end date. A fixed-term contract expires on a set day, with no retrenchment process. A permanent role ends only by resignation, retirement, dismissal or retrenchment.
What does a permanent employee earn beyond salary?
Statutory benefits that build with service. Gratuity leads.
Let’s say a Pune analyst leaves after 6 years and 8 months on a last-drawn basic of ₹45,000 a month.
| Step | Working | Amount |
|---|---|---|
| Completed years | 6 years and 8 months, part over 6 months rounds up | 7 years |
| Daily rate on basic | ₹45,000 ÷ 26 | ₹1,730.77 |
| 15 days per year | ₹1,730.77 × 15 × 7 | ₹1,81,731 |
| If service were 4 years 11 months | Below the 5-year rule | Nil |
The formula sits in section 53 of the Code on Social Security, and the statutory amount is capped at ₹20 lakh, although you can always agree to pay more by contract. Your gratuity liability should be provided for monthly, at about 4.81% of basic.
Basic matters more since November 2025. Under the 50% wage rule, when allowances exceed half of pay, the excess is added back to wages, which raises both the gratuity base and the PF base for anyone on a low-basic structure.
How do you end a permanent employee’s job lawfully?
By following the contract, your standing orders and, for workers, the IR Code.
Managers and supervisors earning over ₹18,000 a month fall outside the IR Code’s “worker” definition. Their exit terms come from the contract and the state Shops and Establishments Act. For workers, retrenchment needs one month’s notice and 15 days’ pay per completed year. Set the notice period clearly in the appointment letter. Our guide to hiring employees in India covers the full contract set.
How does Remunance employ permanent staff for you in India?
Remunance hires permanent employees on its own Indian entity and handles gratuity, bonus, leave administration, maternity benefit and full and final settlement for each of them. We have placed 1,200+ employees for clients across 34 Indian cities. If you want permanent India hires without opening a company, get a costed offer for your first role.
What else do people ask about permanent employees?
What is the difference between a permanent and a contract employee?
A permanent employee has no end date and the full benefit set. A contract employee is either on a fixed-term contract or supplied by a contractor, and their benefits depend on which.
Can a permanent employee be terminated in India?
Yes, for valid reasons and with due process. Misconduct needs an inquiry under the standing orders, and retrenchment of workers needs notice and compensation.
Is a probationer a permanent employee?
Not yet. A probationer becomes permanent on confirmation, but their PF and statutory dues start from the first day.