Is It Mandatory to Deduct PF for Management Trainees and Factory Apprentices? Seeking Legal Insights

Respected All,

Greetings of the Day!

I have one query that our organization hires Management Trainees & Factory Apprentices (Not covered under the Apprenticeship Act). However, we do not deduct PF from this category of trainees. Now, I just want to know whether it is mandatory to deduct PF contributions from these trainees/Apprentices, and if yes, under which law or act.

Your cooperation will be greatly appreciated.

Thank you,
Rahul

Hi,

Yes, it is mandatory to deduct PF for both Management Trainees and Factory Apprentices. There is no separate law for it; both of them come under the Provident Fund Act of 1952 itself. The Madras High Court, in 2007, ruled that Apprentices who are engaged to do the work of regular employees are covered under the PF Act in the NEPC Textile Ltd, Coimbatore Vs Asst. PF Commissioner, Coimbatore case.

With Regards,

Mr. Thumbs Up

Apprentices (not covered under the Apprenticeship Act) and trainees fall within the definition of an employee under section 2(f) of the EPF Act. Therefore, it is mandatory to deduct PF from their wages/salaries.

Dear All,

Please find attached a copy of the Supreme Court Judgement on the applicability of Provident Fund (PF) for Trainees/Apprentices engaged under the Company's Standing Orders. Section 2 (f) (ii) of the Employees' Provident Fund and Miscellaneous Provisions Act 1952 also clearly excludes Apprentices engaged under the Standing Orders of the establishment.

Regards,
N. Nataraajhan
Sakthi Management Services
HP: +91 94835 17402
Email: natraj@sakthimanagement.com

Dear All,

Please find attached a copy of the Supreme Court Judgment on the applicability of Provident Fund (PF) for Trainees/Apprentices engaged under the Company's Standing Orders. Section 2(f)(ii) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 also clearly excludes Apprentices engaged under the Standing Orders of the establishment.

Regards,

N. Nataraajhan
Sakthi Management Services
HP: +91 94835 17402
Email: natraj@sakthimanagement.com

Dear Natraajhan, I hope you would agree with me that reading between the lines does not make sense in terms of the legal implications of the EPF law. In your attachment, you have provided only an excerpt, seemingly from a newspaper, without including the link to the complete judgment. Additionally, there is no mention of the date of the judgment or the specific newspaper in which the news item was published.

It is crucial to consider the background, basis of appeal, and arguments presented in the trial before drawing any definitive conclusions for guidance. Relying solely on a news item for advice can potentially mislead both the advice seeker and the HR community, leading to non-compliance with labor and service laws.

Furthermore, the excerpt you shared mentions that "the apex court held that in the case at hand, trainees were paid a stipend during the training period, with no right to employment or obligation to accept any offer of employment from the employer. Therefore, the trainees were apprentices engaged under the Standing Orders of the establishment." However, it is important to question whether the apprentice was receiving only a stipend (not wages) or if they were indeed engaged under the Standing Orders.

Thus, your advice may not align with the definition of an employee as outlined in Section 2(f) of the EPF Act.

Regards,
N Nataraajhan
Sakthi Management Services
HP: [Phone Number Removed For Privacy Reasons]
Email: [Email Removed For Privacy Reasons]

Dear Mr. Dingra,

Please find attached a copy of the Supreme Court Judgment dated 30th Jan '2006 and also the Allahabad High Court judgment in 2010 confirming the Supreme Court ruling for your information. The Supreme Court has clearly held that even in the absence of certified Standing Orders, since the model standing orders are automatically applicable, trainees appointed under the standing orders are not liable to be covered under PF.

Regards,

N. Nataraajhan
Sakthi Management Services
HP: +91 94835 17402
Email: natraj@sakthimanagement.com

Dear Nataraajhan, have you found the answer to my question, "Did you see if the querist has said anywhere that the apprentice was being paid only a stipend (not wages), or engaged under the Standing Orders?" on which category the quoted judgments apply?

Additional Questions

Now another question also arises: has the querist stated anywhere that the apprentices of his company did not enjoy any right to employment or have no obligation to accept employment if offered, as per the spirit of the judgments?

Still further, another question arises: has the definition of the employee under section 2(f) been scrapped by any of the judgments referred by you?

Both judgments reveal that a distinction has to be made between the apprentices employed on wages with the right of employment and those merely on a stipend basis having no right to claim employment to fall within or outside the definition of sec. 2(f).

Moreover, any judgment has to be analyzed in its true spirit depending upon the facts, characteristics, and circumstances of events or the nature of the case. Needless to emphasize, any court judgment is case-specific only and cannot be applied universally and automatically to all types of cases unless that is allowed through the judgment of the court to be made applicable in another case by a competent court of law that too having similarity of nature, characteristics, or circumstances.

Conclusion

So, the mere term "apprentice" has no relevance for the purpose of applying any case law in all the cases of the industry in any way.

Dear Colleagues,

There have been many attempts and explanations in the above posts made by learned colleagues, but still, the answer is not available. Under the PF Act, apprentices engaged under the Apprentices Act 1961 and trainees under Standing Orders are also exempted from coverage. However, you should have a training scheme under your own certified Standing Orders. A scheme means completing things starting with Purpose, Objectives defining policy that should have a well-classification of trainees, qualifications, syllabus or training contents, Leave Rules, welfare, tenure, relieving, terms of payments, and terms for completion of training. One essential thing that should not be missed out is debiting the Stipend account in the books. In my company, I tried to defend the employer on this legal footing, but the Accounts Section has shown all trainees' remuneration in the salary and wages account. Therefore, it did not have legal and right backup, and PF cover was implemented finally only due to this fault.

Regards,
RDS Yadav
Labour Law Adviser
Director-Future Instt Of Mngmnt and Technology