Navigating ESI Deductions and HRA Limits for Vocational Trainees: Need Guidance

Questions on ESI Contribution and HRA Calculation

I'm Dinesh, working in a 5-star company. I have a few questions for you.

Here, students come for vocational training for a period of less than six months as part of their curriculum. Once they complete their training, they go back to work. Is it compulsory to deduct ESI contribution at 1.75%, and will they be covered under the Apprentice Act?

HRA Calculation and Concerns

What is the maximum percentage of H.R.A., and how is it calculated? Is there any problem if HRA exceeds the basic salary?

It would be greatly appreciated if someone could answer these queries.

Regards,
Dinesh

Your company does not have any statutory liability to provide them with such facilities. If your company wishes to give such welfare facilities to those students, then it is acceptable. The Apprentice Act covers vocational trainees; you can include them under the group medical policy under WC that already exists in your company, instead of ESIC.

Ref: ESIC Corp. Mumbai v/s Indian Hume Pipes Co. Ltd. (1963) 2 LLJ. 104 (Bom)

An apprentice is a trainee, not an employee/worker, and any provision of labor law does not apply to him unless it is specifically made applicable to him.

Regards,
Shahu

"Definition of Vocational Certificate Holder

\"Vocational Certificate Holder\" means a person who holds a certificate in a Vocational Course, involving two years of study after the completion of the secondary stage of school education, recognized by the All India Council for Technical Education.

Eligibility for Apprenticeship

An Engineering Graduate, Diploma Holder, or Vocational Certificate Holder who has undergone training or has job experience for a period of one year or more, after attaining these qualifications, shall be eligible for being engaged as an apprentice under the Act."

HRA Calculation Based on Location

HRA is calculated based on the PF Base. Fifty percent of the salary is provided in the case of residential accommodation taken on rent in Bombay, Calcutta, Delhi, or Madras (Chennai), and forty percent of the salary in any other case.

ESI Contribution for Trainees

They are catering to students, and we are providing a stipend of ₹1000 per month. Every month, we disburse ₹20,000-₹25,000 as a stipend without deducting the ESI from it. One ESI inspector mentioned that ESI contribution is mandatory for the trainees as per the new ESI amendment. I shared this information with my manager, but he denied it. I just want to know if it is mandatory to deduct ESI from the stipend for the trainees (students).

Ask that inspector for a new amendment. Statutory deductions such as PF, Gratuity, and PT are calculated on the PF base, i.e., Basic + D.A., and ESIC on Gross. Please let me know if you need any further assistance.