Industrial Relations And Labour Laws
Hospitality Industry
Gm (hr)
S. Krishnamoorthy
Director Of Private Ltd. Companies
Sunita Sarkar
Hr / Personnel Deptt.
Legal Officer
Retd Human Resource Manager
+1 Other

1. Is it mandatory to deduct PF or ESI on Stipend or consolidated salary???
2. Is it applicable to Delhi NCR or Other states also???
3. Can it be possible that deduct in factories only or we need to applicable it on HO also???
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Whether it is consolidated or Basic+ DA +++++ pattern of salary, PF/ ESI is to be paid if the establishment and the EMPLOYEE are covered.
Under EPF Delhi is not exempted area but please check whether the particular place in Delhi where the firm is situated is exempted under ESI.
Stipend paid to trainees OTHER THAN THOSE undergoing training under Aprrentice Act, 1961 attract EPF and ESI contribution. However there is a judgement withholding EPF Organisation from covering Trainees even other than Apprentices under EPF.
First of all there is a difference between STIPEND and SALARY.
Provident Fund is not deductable from STIPEND. The Provident Fund Scheme does not provide for deduction / contribution on & from STIPEND.
ESI Act provides for contribution / deductions from & on STIPEND.
Please also note that Consolidated Salary attracts the provisions of both PF & ESI - hence you are liable to to deduct and pay contribution to both PF & ESI.
The Mitra
Salary is different from stipend Salary pr wages are paid to regular employees or casuals or temporary employees or part time employees and attract ESI and PF

Stipend is paid to Trainees olr Learners. Both Acts exemt Trainees from the provisions of the Act. However, if the Trainees are not proved to be trainees then they will get covered

Some Tests

1. Are you defining productivity measuresw?

2. Are you conducting theory classes for them

3. Are you maintaining record for these classes

4. Are you evaluating them?

5.Are you making them to come in shifts?

There are more questions. Refer to TISCO Judgement on this (Or is it TELCO?) This judgement clearly defines the rules to consider a Trainee as trainee.

I faced a problem in one company. Trainees were not covered under PF The PF inspector examined all records and even allowed that we make them to come in shifts. But when he examined the Productivity linked Bonus scheme, it covered all Trainees for calculating Productivity. That is it. We had no other option but to cover these employees. I also had another experience wher we could show all records of training. But we covered them under ESI Quoting this, PF authoritoes aslked us to cover them under PF. But we took a firm stand that every enforcement authority should be concerned about his area only and we could succeed in convincing them

I am sorry I did not notice the questions
2, Delhi NCR I have no personal knowledge It must be applicable Just check your neighbours
3.Your HO is an establishment and all shops and establishments are covered under ESI in Delhi. Whetehr you factory is covered or not youe HO has to be covered
Does this answer your query?
Dear Madhu sir,
which is the judgment withholding EPF Organisation from covering Trainees even other than Apprentices under EPF.
Please give an immediate reply in citehr itself or mail me at
ESI is mandatory to deduct from the stipend. However PF may or may not attract on stipend. This depends on that if there is a agreement or training scheme or company's standing orders providing that the PF would not be applicable on stipend, then it would not be deducted and in absence of such training scheme or standing orders, it would be deemed to be applicable on stipend.
ESI is mandatory on stipend, however PF depends on as to whether there is any training scheme or company's standing orders which provide for PF applicability on stipend. If the training scheme or standing orders say that PF would not be applicable to trainees , then PF deduction is not mandatory but if there is no training scheme or standing orders the PF would automatically deemed to be applicable on stipend which makes it mandatory for PF deduction.
Dear colleague,
Kindly refer the case published in "LLR-2006/263 in respect of RPFC Mangalore v/s Central Aercanut & Coka Mfg Co op ltd" in which as decided by the Hon.ble Supreme Court of India on 3-01-06, pf is not applicable Trainees.
ESI on stipend or training allowance is disputable. ESI is mandatory only in the case of 'worker' or 'employee'. A trainee is neither a worker nor an employee. The SC's orders defining a trainee in the case of EPF will be applicable to trainees in the case of ESI also. However, as in the case of EPF, there should be Standing Orders of the company certified by the Labour Department of the State Govt.
S. Krishnamoorthy

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