Navigating PF and ESIC Rules: How to Handle Trainee Stipends and Compliance Issues?

Dear all,

I have a few queries regarding the Shop and Establishment Act and the PF Act.

1) What is the difference between Salary and Stipend in a Shop and Establishment Act?

2) If I want to recruit a trainee in my company, which falls under the Shop and Establishment Act, for a Stipend of Rs. 5000, how will her salary be bifurcated?

3) If a trainee letter is given for the Stipend of Rs. 5000 without deducting the PF, will it affect the company in any way?

The Overall Case:

My company falls under the Shop and Establishment Act. No one in our organization wants PF; hence, we were not deducting the PF from the Salary. However, the ESIC was cut for employees earning under Rs. 10000. Now, we have recruited a Trainee at Rs. 5000. After that, our PF and ESIC consultant informed us that any employee earning Rs. 6500 and below, we will have to deduct the PF. We have not given the trainee a trainee letter, and she has already joined the organization for 2 weeks. My boss has asked me to clear her salary in vouchers and not put her into the payroll of the company. However, the trainee wants a letter, or else she will quit. Now, what is the solution for this situation? Please help, as I don't want to lose the trainee and want to guard the company's interests as well.

Dear Aklesh,

What you mean is that the letter should not be on letterhead but plain paper, mentioning that we have her as a trainee and we will be paying her in cash.

Regards,
Tina Ignatius

Hi Tina,

If a trainee is doing a job for academic purposes/internship and obtains a letter from his college/university stating that the purpose of this project is solely to fulfill his/her course, and this letter is submitted to the employer, then I think it is not necessary to deduct the PF. Otherwise, any payment to an employee (below Rs. 6500/- as basic) will attract PF.

Regards,
Priya J.

(Please correct me if I'm wrong and update me with the latest changes in labor laws)

Hi Tina,

Regarding the provision of the Provident Fund and ESIC acts, there is a one-day membership requirement. This applies to all types of employees where the master-servant relationship comes into force. Apprentices are excluded from the day one operation since they have specific provisions in the relevant statute.

In such typical circumstances, one must choose a path that is not harmful on either the compliance side or the HR side. In my opinion, you should focus on C2C and leave other issues aside. I suggest asking your boss to review this approach.

If you have found any new remedies, please inform me.

Best of luck.

Regards,

Hi All,

I need your help in calculating my PF contribution. I worked in a Mumbai-based company for 2 years and 8 months. In the first year of employment, I contributed Rs. 927 per month (12% of the basic), which was matched by my company as well. Therefore, the contribution from my side for the 1st year was Rs. 927 * 12 = Rs. 11,124. Similarly, the contribution from my company's side for the 1st year was also Rs. 11,124. The total contribution was Rs. 11,124 + 11,124 = Rs. 22,248.

For the remaining 20 months, my contribution was Rs. 1200 per month (12% of the basic), and the company's contribution was also Rs. 1200 (12% of the basic). This means the contribution from my side for 20 months was Rs. 1200 * 20 = Rs. 24,000, and the contribution from my company's side for 20 months was also Rs. 24,000.

Now, my question is whether my company will pay just Rs. 780, which is the maximum as per the rules, or if this Rs. 780 goes to the pension fund and the remaining Rs. 659 goes to PF contribution. How does the whole calculation work, and what amount will I receive now?

For your reference, I joined this company on 1st Aug '05 and left on 31st March '08. Please help me calculate the amount.

Please reply to me at [Login to view].

Hi, I am Hema. I want to know, for the employee who leaves the organization without serving notice period or intimation, is the company still liable to pay PT/ESIC/PF for them.

Thank you.

Dear all,

I have a few queries regarding the Shop and Establishment Act and the PF Act:

1) What is the difference between Salary and Stipend in a Shop and Establishment Act?

2) If I want to recruit a trainee in my company, which falls under the Shop and Establishment Act, for a stipend of Rs 5000, how should her salary be divided?

3) If a trainee letter is issued for the stipend of Rs 5000 without deducting the PF, will it affect the company in any way?

The Overall Case:

My company is governed by the Shop and Establishment Act, and no one in our organization wants PF deductions. Therefore, we have not been deducting PF from the salary, but ESIC deductions were made for employees earning under Rs 10000. Recently, we hired a trainee at Rs 5000. Subsequently, our PF and ESIC consultant advised us that for any employee earning Rs 6500 and below, PF deductions are mandatory. We did not provide the trainee with a trainee letter, and she has already been with the organization for 2 weeks. My boss instructed me to clear her salary through vouchers without including her in the company's payroll. However, the trainee is requesting a letter, and if not provided, she may resign. What is the solution to this situation? Please help as I aim to retain the trainee while safeguarding the company's interests.

You can issue the letter as "management trainee," with stipend, and state no PF & ESIC deductions for them, deduct only PT.