Are Trainees Paid Below Minimum Wage Entitled to PF Deductions? How Should This Be Handled?

Hi,

An IT company in Karnataka has appointed two employees, and they are undergoing training provided by the company. However, the company is paying them below minimum wages. Once their training is complete, the company will increase their salary. How should this matter be handled? Should PF be deducted for what they are receiving as salary, or could there be any noncompliance since their salary is below the minimum wage?

Please suggest to me in detail.

If any employee is undergoing training as an internship, there is no need to contribute to EPF. If they are hired for a job and are undergoing any training, then the company has to pay wages in accordance with the minimum wage act. Wages shall not be less than the minimum wages. In this case, both ESI and EPF are applicable as they are employees of the organization. If you need any clarifications, please do reach out to me.

The employees on training are treated as apprentices, and minimum wages, EPF, and ESIC rules are not mandatory for apprentices.

Please let me know if you need any further assistance.

Apprenticeship is applicable for the organizations registered under the Apprentice Act. How can an organization hire engineers/graduates who have completed their academics and employ them as trainees, with the prospect of increasing their wages after training? It is clearly stated that they are appointed as employees but are provided training as freshers.

Ensure proper paragraph formatting with a single line break between paragraphs.

Sweta and Abhishek, were they officially appointed by the company and added to the payroll? Has the company provided them with an appointment letter?

Bharat Sanchar Nigam Limited vs. Union of India and Others 2015 LLR 893

The High Court held that the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 include every person, including apprentices or trainees, within the definition of 'employee,' except those engaged under the Apprentices Act, 1961 or Standing Orders.

If it is not explicitly mentioned in the offer document that the intern is a trainee as per the standing orders, Provident Fund (PF) could be applicable.

Please hire them under a stipend as trainees. There are no statutory deductions under stipend mode.

Post training, we can move them to CTC mode along with a salary hike, subject to minimum wages.

Compliance with Minimum Wage and Benefits for Trainees

As Jeevaratnam has said, except for apprentices engaged following the Apprentice Act, 1961, all trainees, by whatever name they are called and by whatever form their remuneration is paid, should be paid minimum wages and contribute to PF, ESI, etc. They should also be paid a bonus at par with other regular workers if they have worked for the minimum qualifying days (30 days) in the preceding financial year. The period of training should also be considered for their gratuity eligibility and calculation.

If the law in this regard is diluted, there will not be any skilled workman in any organization, but everyone will manage the entire show with trainees only. There will not be any theory classes as required as per the Apprentice Act. You will also engage the trainees in the second or third shifts and ask them to do overtime. These are other tests to distinguish an apprentice under the Apprentice Act and a trainee engaged without following the said Act.

You need to extract work or labor but cannot give what the laborer is eligible for. This is unfair.

Regards, Madhu.T.K

If any person is engaged as an intern in any department for a specific period, they need not be covered under EPF or ESI. Furthermore, if any person is engaged as a trainee on the company's or contractor's payroll, even for a single day, and is being paid a stipend or salary, their wages will attract EPF and ESI contributions by the Principal Employer (PE), unless the PE has engaged those persons under the Apprentices Act for a specific period prescribed and provisioned under the applicable Apprentice Rules.

There is no matter of minimum wages in the case of apprentices because they are paid a stipend as per their own rules on a yearly basis.

Thank you.

Difference Between Interns and Trainees

An intern is different from a trainee. An intern is not paid a salary or stipend but is doing their training as part of their curriculum, certified by the Principal of the institution. An appointment order for an intern does not include statements such as an increase in stipend after a specified period.

In an internship arrangement, there is a company guide and a faculty member to whom the intern reports periodically. In a training arrangement, the trainee directly reports to the officer to whom all other regular workers report.

The distinctions above clarify that the individual in question is a trainee, not an intern. It is unlikely that any IT company will engage apprentices from RI centers under the Apprentice Act due to concerns about existing labor laws. Such engagements are more common in industries requiring Welders, Fitters, Machinists, Turners, etc., rather than in the IT sector where the specific trades they seek may not be available in ITIs.

Regards, Madhu.T.K

Dear Friends,

If any person is engaged in an internship in any department for a specific period, they do not need to be covered under EPF or ESI. There is a matter of Minimum Wages. As per Apprentice rules, we have to pay a stipend as follows:

- Stipend for the First year: Semi-skilled wages of 70%
- Stipend for the Second Year: Semi-skilled wages of 80%
- Stipend for the third year: Semi-skilled wages of 90%

The stipend above changes if there is a revision in Minimum wages (April & October).

Regards,
Rajesh Kumar Singh

Yes, the company officially appointed them and mentioned in their offer letter the designation as "TRAINEE ENGINEER" with a CTC which is less than minimum wages. Should they be treated as an employee or trainee?

Clarifying the Status of Trainees and Employees

I think the matter is very clear: it is not the designations that you give but the functional responsibilities that decide whether a person is employed as a trainee or an employee. It is clearly stated that only persons engaged following the Apprentice Act will be excluded from labor law provisions.

Unfortunately, SwtaAbhishek is raising the same question without replying to our inquiry about whether he was engaged through the RI center, through the Apprentice Advisers, or simply by the company. I have also provided some tests to establish the existence of an employer-employee relationship.

To make it very clear, if your Trainee Engineer was appointed through the Apprentice Adviser, Central or State, following the Apprentice Act, on a stipend declared by the Central Government from time to time, with specific provisions that restrict their employment during night shifts and overtime working, and with a clause that you cannot take any disciplinary action against the apprentice without informing the Apprentice Adviser, then your trainee is an Apprentice. In this case, there is no need to follow the Minimum Wages Act or any other labor Acts. Please clarify.

Regards, Madhu.T.K

Swetaabhishek ji, the company has to follow all statutory compliances for the said employee.

Thank you.

Kokitkark.T.K.

First of all, the basic salary should not be less than 60% of the gross salary.

Dear KOKITKARK,

Salary breakdown formula depends on the city (town). The general practice salary breakdown formula is as follows:
- Basic = (50% of gross salary) & DA is part of Basic.
- HRA = (60% of basic)
- Conv. = (Left of salary 40%)
- Phone = (Left of salary 25%)
- Special Allow. = (Left of salary 35%)

The above breakdown varies from company to company. However, in general practice, we follow the formula mentioned above.

Regards,
Rajesh

Dear seniors,

The company has appointed them with the designation as "Trainee Engineer." They are not covered under the Apprentice Act as the employee is not engaged through the RI center or through the Apprentice Advisers.