Is PF Deduction Necessary for Trainees During Their Probation Period? Seeking Clarity

Dear Seniors,

We are an engineering firm, India Pvt Ltd, with over 1000 employees. We are planning to hire two or three engineers who completed their B.Tech 8-9 years ago. We are considering hiring them as Trainees/Interns/Stipend.

PF Deduction for Trainees

My question is whether we need to deduct PF as they are trainees and under probation. Can we start PF deduction upon completion of the one-year training and probationary period? Please clarify.

Regards,

All trainees, other than those under the Apprentices Act and the Standing Orders of the company, are considered employees and shall be covered under PF.

Regards,
Varghese Mathew

User Input:

A similar question was asked earlier at this link: https://www.citehr.com/279601-please...ts-during.html

Coming back to the question asked: Should PF be deducted from the salary of such interns/probationers, etc., or not? Ideally speaking, NO. But practically speaking, YES.

See, ideally, such persons can't be termed as employees of the company because then the distinction just vanishes. It's with the belief that in the future, if their performance is found satisfactory, such personnel will be subsumed as employees, and then only exclusive employee benefits should be made available to them.

But wait. What legislation lays down is a term "Excluded employee," and through that, a person earning below Rs 6500 is not to be covered under PF. Clearly, engineers will be paid much higher than this Rs 6500 a month, so this door stands closed. If we go by the intent of the legislation, then we must deduct PF, as has been held by SC too in Andhra University v. R.P.F.C (1985) in line with the preamble of the legislation.

Now let's see the practical aspect of this. You've already got 1000+ employees, meaning a good-sized company. Deducting additional PF for 3 trainees won't make a difference. But you won't have anything to prove if an Inspector visits your office and questions such non-deduction. The cost of non-deduction will be far more than the cost of deducting, as in any case, he won't be submitting like that, and then you must have a good legal team and a case to go to a tribunal or something. Is it even worth it? Plus, we all know that the nomenclature of trainee, etc., is only for distinguishing probations, notice periods, increments, and termination periods, not in a work sense at all. Let's see the way legislation wants us to and reduce the confusion and resulting impact on us.

EPF Act Coverage for Trainees

Trainees are also covered under the EPF Act. You have to deduct PF. Even otherwise, the PF Act is welfare legislation; it has provisions for pension, insurance, etc. In the interest of the employee, it is always better to cover all trainees/stipend persons.

Where in the EPF Act is it mentioned that an employee earning below Rs 6500 a month is not to be covered under PF, as stated in your third paragraph above?

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

With reference to your query, trainees/engineers are also eligible for PF contribution. However, you have the following options:

a) If their Basic+DA is less than Rs. 6500/- per month, then as per the PF Act and Apprentice Act, PF contribution is mandatory.

b) If their Basic+DA exceeds Rs. 6500/-, the employee may choose to limit their contribution to PF to Rs. 780/- by submitting a letter to HR stating the same. Alternatively, if the employee was not enrolled in PF in their previous company, they can fill Form 11, which will exempt them from PF altogether.

I hope this information is helpful.

Warm regards,
Deena Jagasia

If the payment to trainees is more than ₹6500 per month and if they were not earlier in EPF, then you need not deduct contributions from their stipend but obtain Form 11 from them.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

I am agreeing with you. I was trying to understand the legally correct and valid facts. When we hire an employee with a salary of more than ₹20,000 per month and do not deduct the PF, as they are trainees, and being an office engineering consultancy, we don’t have a certifying Standing Order and are not registered with the Apprentice Act 1965. Otherwise, your suggestion is wise. Thanks for your time.