Stipend Deductions: Should We Deduct PF & ESI and Pay Bonuses to Trainees?

Can we deduct PF & ESI on the stipend paid to the trainees? Should we pay a bonus to them?

Thanks & regards,
Mukesh Kumar

Yes, PF and ESI are applicable for trainees and also for part-time workers. Additionally, if a bonus is paid to all, it should be considered.

Regards,
Shaikh

No, if the candidate is in a company only for an internship, then they are not eligible for PF, TDS, or ESI deductions. If they are on the job and serving their probation period, and after the probation, they become a permanent employee, then they are eligible for PF, ESI, etc.

Also, every employee is eligible for a bonus if they have completed 30 days of work in that year.

PF and ESI are not only for permanent employees. I had a personal experience regarding the above-mentioned query by Mr. Mukesh.

Regards,
Shaikh

First of all, I am not a Mr. I am Ms. Dipti. Secondly, I have also experienced the same. Until the probation and trainee period, no PF is deducted because there is no assurance of the candidate whether they are going to stay in the company or not after their internship. You can also have a look on Google for more information.

Dear Ms. Dipti, I am extremely sorry for that. In my previous company, it was a new setup, and we didn't deduct PF for trainees and associates because they were under probation. During the inspection, we were asked to do so. Now, they have sent a letter under section 7A to explain why and on what basis we are not deducting PF for them. After that, we started deducting for them, and it is applicable for part-time employees also. Hope you understand.

Regards,
Shaikh

Based on my experience, stipend holders are not eligible for PF because stipend and salary/wages are different. However, trainees are eligible for a bonus after working for 30 days in a particular year.

Thank you.

Regards,
Sjjagriti

Apprentice Trainee Exemption from ESI & PF

Only the Apprentice Trainee who is employed as per the Apprentice Act 1961 is exempted from ESI & PF deduction. If the trainee is not employed under this act, then it is mandatory to deduct ESI & PF from the stipend/salary paid to such a trainee.

Definition of an Employee under the PF Act

Kindly refer to the definition of an Employee under the PF Act, Section 2(f), clause ii, which states:

ii) Engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961) or under the standing orders of the establishment;

If you have engaged such a trainee as per your standing order or under the Apprentices Act, they will be exempt from the PF Act.

ESIC Amendment on Trainees

However, ESIC has amended its definition of an employee through an amendment dated 24th May 2010, applicable from 1st June 2010. According to this definition, trainees/apprentices engaged under either the standing orders or the Apprentices Act will be covered by the ESI Act.