Are PF and ESIC Deductions Applicable During Probation? Understanding Employee Status Differences

Dear all, please inform me if PF and ESIC are deducted during the probation period of an employee. Are probationary employees and trainees the same?

Regards,
CGM

It depends on the contract of employment.

1. If you hire for a fixed period as a Trainee, then no deductions of PF and ESI apply; it is on a stipend basis, and you can deduct a professional fee.

2. If you consider someone as a probationary employee or Trainee, as per the Act, yes, you can deduct the PF and ESI.

You may also want to check the guidelines for Trainee employment or probationary employee employment because some companies have different policies for both cases.

Thanks,
Ajay Chhatwal

As Mr. Sanjeev clarified, P.F. and ESI are deductible from the first day of joining by an employee, which means even during probation, provided their wages are within the limit of Rs. 6,500/- p.m. or Rs. 10,000/- p.m., respectively. It is a statutory liability, and you cannot enter into a contract with the employee to avoid this liability.

Regards,
B. Saikumar
HR & Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
Tel: [Phone Number Removed For Privacy Reasons]

I am trying to put it in a simple way: all statutory liabilities like ESI, EPF, and PTax are applicable to the Probationary and Trainee staff/workmen, subject to the limits prescribed under the respective acts. For example:

- **ESI:** ₹15,000/- p.m.
- **EPF:** ₹6,500/- p.m.
- **PTax [In Maharashtra]:**
- Up to ₹5,000/- earned gross salary/wages - NIL
- ₹5,001 to ₹10,000/- - ₹150/-
- Above ₹10,000/- - ₹200/- [In February, paid in March, it should be ₹300/-].

Regards,
Pramod Thakar
Pune

Mr. Sanjeev is absolutely right. ESI and PF deductions do not have any relation with the probation period; they should be deducted from the date of joining.

Sub-probation P.F and ESI Deductions

In my view, employees under probation and trainees are not on par insofar as their eligibility for P.F and ESI contributions are concerned. The P.F Act clearly excludes apprentices and trainees appointed under the Apprentices Act and Standing Orders from being entitled to P.F since what they are paid is a stipend. As far as ESI is concerned, apprentices/trainees appointed under the Apprentices Act are not eligible, but trainees appointed under standing orders are made eligible by a recent amendment.

Regards,
B. Saikumar
HR & labor Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
[Phone Number Removed For Privacy Reasons]

Sub-Probation P.F & ESI Deductions

In my view, employees under probation and trainees are not on par insofar as their eligibility for P.F. and ESI contributions are concerned. The P.F. Act clearly excludes apprentices and trainees appointed under the Apprentices Act and Standing Orders from being entitled to P.F. since what they are paid is a stipend. Regarding ESI, apprentices/trainees appointed under the Apprentices Act are not eligible, but trainees appointed under Standing Orders are made eligible by a recent amendment.

Employees on probation are neither trainees nor apprentices. They are at par with the rest of the employees of the organization.

Regards,
B. Saikumar
HR & Labor Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
[Phone Number Removed For Privacy Reasons]

A newly joined employee under the trainee category must have ESI contributions deducted as per the law. In some cases, there is no need to deduct PF after the probation period, but PF contributions are compulsory.

Thanks,

V. Amuthan

In my opinion, a reading of the EPF Act states that trainees hired under the provisions of approved Standing Orders of the company will be exempt from payment of EPF. For example, if an employee is hired as a trainee for a 2-year period, during which one year is under training and the second year is on probation as per the provisions in the Standing Orders of the Company, then they are exempt from EPF for the first two years. If they are not covered under the provisions of the Standing Order, then they are entitled to PF. The coverage here would mean that you have to explicitly state in the appointment order that they are hired as per the provisions of the Standing Orders of the company.

ESI is applicable from day one for all employees, including trainees under any category, and contract employees subject to the wage ceiling of Rs. 15,000 per month.

Regards,
M.V. KANNAN