Understanding Salary vs. Stipend: What Deductions Apply for Trainees?

I would like clarification on the major differences between salary and stipend. Up to now, we have been paying salary to our regular employees on our rolls and stipend to our trainees.

What are the various deductions to be applied for the stipend?

Regards,

Mithil Y. Sardesai
HR Manager & Administrator
Sunlux Technologies Ltd.
Bangalore

Dear Mithil,

Stipend does not have any liability of ESI or PF, given that its handling in your accounts department is proper.

Vijay Vyas
Manager - HR

Hi Sardesai,

Salaries are paid to the employees on Rolls. Salaries tent amount to deduction of statutory payments, such as PF, ESI, P.TAX.

Stipend is paid to trainees who are not employees of the company. They are only under training, and they are the learners of a specific job. When they are not employees, there is no necessity for deduction of any of the statutory payments.

Mohan Rao Manager HR

Dear Sri Rao Garu,

I heard that there is a Supreme Court judgment regarding "trainees" and PF payments. Could you kindly provide me with some references on this matter?

Furthermore, for contract labour, is it permissible to divide the wages into basic pay and other allowances? If so, what is the minimum percentage that should be allocated to basic pay for the following categories:
a) Contract labour
b) Security personnel

Please respond at your earliest convenience.

Regards,
DP Gunturi