Can We Offer a Stipend to ITI Freshers Without Deductions? Seeking HR Insights

I am working as an HR Executive in an electronic manufacturing company. My management wants to know if there is any option to provide a stipend to a fresher without any statutory deductions or additions. Please clarify.

Thanks & Regards,
R.D. Babu

You can show the employee and pay them a stipend as a trainee, or you can have them work as an apprentice and pay their salary through the bank itself, but it is better not to show the apprentice in the Muster's.

Regards,
Ramkishore

Can you please let me know what the procedure is for the Apprentice Act with any statutory deductions for the trainee/apprentice? No ESI for apprentices; you need to pay ESI for trainees. ESI is mandatory, but no PF is applicable for either.

Regards,
Ramkishore

There are rules applicable to apprentices. You cannot just select and appoint someone as an apprentice. Please make sure that you are following the procedure; otherwise, you will have a bigger problem.

If they are registered under the Apprentices Act, then the stipend is applicable without any statutory deductions. However, if they are company trainees, then it is compulsory.

Regards,

Dear Ramkishore, As you see the definition of Employee or Worker for PF, ESI Act, and Payment of Bonus Act, you can clearly understand it yourself. You may also check the definition of Wages for both these acts.

The word "stipend" is exclusively for the compensation of training for those apprentices who are governed by separate legislation like the Apprenticeship Act.

Status of Company's Standing Orders

What is the status of your company's Standing Orders? Have you shown a class of worker as an Apprentice in your standing orders? Please verify this as well.

In the end, in my opinion, there is no way to exempt your trainee from statutory deductions. However, you can seek legal advice to see if there is any scope to get an exemption from PF for the apprentice if you have classified them in your certified standing order. I hope this may help the situation.

Regards,
Mangesh Wakodkar
Aurangabad

[QUOTE=saswatabanerjee;1857054]

Yes, your synopsis is what I was talking about.

Apprentice Employment Limits

One additional point - there is a limit on the number of apprentices that can be employed in a unit. That number is decided by the apprentice advisor. Also, you need to register each of the apprentices (as you have stated). Furthermore, the period is also decided by the apprentice advisor (generally 1 year). If the rules are followed, then it's okay. In fact, I have seen some companies in rural Maharashtra save a good amount of money by using apprentices (as they are paid far less), even for roles like data entry staff.

Cost-Cutting with Apprentices

Yeah, the apprentice is being used for cost-cutting in many companies as they can work for the same stipend for 1 year, and there will be no statutory deductions if the number is higher. All these statutory-related aspects should be maintained. Simultaneously, the apprentice may write the exam at the Apprentice Board and strive for a permanent position in the company.

Regards,
Ramkishore

Indeed, there are no statutory deductions for a stipend, not even a specific mode of payment, and deductions are far from that.

Management always looks at the findings to avoid spending on welfare measures for employees. Anyway, coming to your point—if your company is registered under the Apprentice Act, then you can pay a stipend with the deduction of ESI, which is mandatory, and EPF contributions do not fall under the liability of the employer. Morally, it is good to provide EPF to apprentices for social security. Please go through the Apprentice Rules of your state.

Thanks,
Naresh Gadde
Hyderabad

It depends on company norms. If your company is registered with PF/ESI, you can make the deductions; otherwise, no.

Regards

It depends on company norms. You can show the apprentice candidates as off-roll employees, and you can dispatch their salary by hand. There is no need to deduct any PF or other statutory deductions. Alternatively, you can show them as on-rolls and deduct PF also (if they want).

Regards,
Ratna.V HR