Are Trainees Entitled to Bonuses? Understanding Statutory Obligations and Eligibility

Dear Team,

Please advise if a trainee can be eligible for a bonus. Is there any statutory obligation that states the bonus amount has to be paid for trainees?

Regards,
Abhinav

Trainees are entitled to receive all statutory payments and contributions, including bonuses. There may be a designation called "Trainee," but you cannot label an employee as a trainee solely to withhold statutory contributions such as ESI, PF, welfare fund, and payments like wages at minimum rates fixed for each employment, bonus, gratuity, etc. However, apprentices engaged under the Apprentice Act are not eligible for bonuses.

Madhu.T.K

I agree with my colleague Sh. TK Madhu that trainees appointed by the company are covered under the Payment of Bonus Act, 1965, provided they receive a salary not exceeding Rs. 21,000 per month (revised w.e.f. 1-4-2014) and have worked for a minimum period of 30 days in a year. The bonus payable to them is to be calculated as if their salary or wage were Rs. 7,000.00 or the minimum wages for the scheduled employment, whichever is higher, per month. An employee receiving a salary or wage exceeding Rs. 21,000.00 per month is not entitled to receive a bonus under the Act.

Regards, BS Kalsi

Yes, you have to pay a bonus to trainees until you are able to justify them as apprentices as per the Apprenticeship Act. This includes stipend payment, course syllabus, and approval from the apprenticeship board.

Trainees and Their Entitlement to Benefits

Trainees are not entitled to bonuses, PF, and minimum wages. The definition of "employee" as per Section 2 (13) of the Payment of Bonus Act, 1965 (please see attachment) clearly and specifically excludes "apprentices." In most companies, to differentiate between Act Apprentices (under the Apprentices Act, 1961) and Company Apprentices (as per the Company's Standing Orders), apprentices directly recruited and trained in various trades/activities are called "Trainees."

The Supreme Court, many High Courts, and the PF Appellate Tribunal have clearly held that Trainees/Apprentices are excluded from the definition of "employee" for PF benefits as per Section 2 (f) of the EPF & MP Act, 1952 (please go through the attachments).

Trainees/Apprentices are only paid a consolidated stipend, and only a few State Governments have notified minimum wages for Apprentices as well. Unless there is a specific notification for the payment of minimum wages for Apprentices by the appropriate Government, Trainees/Apprentices need not be paid minimum wages.

Regards,
N. Nataraajhan

Only apprentices under the Apprentices Act 1961 can be excluded from the Bonus Act, Gratuity Act, ESI Act, etc. Trainees under the Apprenticeship Act and under the Standing Orders of the Company are exempted from the EPF Act.

Thank you.

Any employee, apart from an apprentice, who has been recruited for a specific job as a fresher, where training or skills need to be imparted, is hired as a trainee. However, all statutory norms have to be followed, and the employee is also eligible for bonuses.

Dear Sirs,

I have a disagreement on the above point. As per the definition of an employee under the EPF Act, two categories of apprentices are excluded: one is trainees under the Apprentice Act, and the other is trainees engaged under the provisions of certified standing orders. There are a number of case laws, including a recent one from the EPF Appellate Tribunal, that uphold the exclusion of trainees from employees and hence the need not deduct EPF.

Understanding the Exclusion of Apprentices from the Bonus Act

The Bonus Act has excluded apprentices from its provisions but does not define the term "apprentice" within the act itself. Therefore, it is necessary to refer to other acts for clarification. In this context, we can consider two references:

1. Apprentice Act

The Apprentice Act defines an apprentice as a "trainee or learner." If trainees fall under this definition, they are subject to the Apprentice Act, which includes all relevant rules such as stipend, course syllabus, and apprentice board approval. Therefore, if trainees comply with all procedures as per the Apprentice Act, they can be excluded from receiving a bonus.

2. Standing Order

The Standing Order provides a similar definition to the Apprentice Act. An "apprentice" is a learner who receives an allowance during their training period. This means that if an employee is paid a stipend allowance, they can be excluded from receiving a bonus.

Regards

Trainees and Their Rights Under Labour Laws

A trainee, by designation, is similar to an employee. If you have the facilities to provide training, engage apprentices following the Apprentice Act. Otherwise, you should have a training scheme as per your own certified Standing Order approved by the Labour Department and engage trainees accordingly. Any other form of engagement may be seen as an attempt to deprive them of their rights under Labour Laws.

If you review the various Acts and the interpretations given by various Courts, you will find that neither the Acts nor the verdicts direct employers to freely hire trainees and pay them as desired. If they are genuinely engaged for training, we should adhere to the available legislation, i.e., the Apprentice Act.

At the same time, if trainees are hired to work the same hours as other workers and face the same challenges, then they should be paid at least the minimum wages and all other statutory payments, including bonuses.

Regards,
Madhu.T.K

Eligibility of Trainees for Bonus Under the Payment of Bonus Act 1965

The initial query was whether trainees are entitled to a bonus under the Payment of Bonus Act 1965. Your reply should have been confined to the query only, but a controversy has arisen regarding their entitlement to benefits under other Acts, such as the PF Act, ESI Act, Minimum Wage Act, etc.

In my opinion, we need to check the definition of employees or workers under each of the Acts or certified standing orders of the firm/company to form a firm opinion. I don't agree with the contention of Sh. Biswas that all apprentices are trainees or learners; hence, they could also be paid a bonus. The apprentices under the Apprentices Act are a different entity who are supposed to get training under government directions for a limited period with no assurance of absorption in the company after completion of their apprenticeship, unlike trainees of the organization, who are at better standings concerning employment.

Regards,
BS Kalsi
Member since August 2011