Intern Stipend Dilemma: Should We Deduct PF/ESI from Their INR 10,000?

Hi Team,

We are hiring interns in our company. These interns will undergo a 6-month internship as part of their curriculum, which is mandatory for students from Deemed universities. We have decided to provide them with a stipend of INR 10,000. Do we need to deduct their PF/ESI?

No, student interns are not covered by either PF and ESI Acts. Even apprentices under the Apprentices Act are not covered by the said Acts.

B. Saikumar
HR & Labour Law Advisor
Navi Mumbai

Coverage Under the ESI Act, 1948

The use of terms such as interns, trainers, learners, probationers, casuals, or temporary employees is irrelevant concerning coverage under the ESI Act, 1948.

Exemptions Under the Apprentice Act, 1961

Only individuals engaged under the provisions of the Apprentice Act, 1961 (and that too only for periods as specified in the said Act) are not covered under the ESI Act due to the provisions contained in section 2(9) of the Act. The Act was amended in 2010 to provide clarity on the coverage position. In the EPF & MP Act, the situation may be slightly different since the Act also acknowledges the position concerning the "Standing Orders of the establishment."

Clarification on PF Act for Student Interns

A student pursuing an internship as part of their academic curriculum stands on a different footing from trainees appointed under standing orders or apprentices appointed under the Apprentices Act. They continue to be students for all intents and purposes, not employees. This trend in skill development as part of the academic curriculum is currently being followed by many educational institutes and B-Schools.

Therefore, keeping this trend in view and to encourage it in the interests of students' futures, the PF department itself clarified in their circular no. coord/40(5) 2015/Misc/clarification dated 12-10-2015 that such students will not be treated as employees. Consequently, the stipend provided to them will not be treated as wages for the purpose of the PF Act, meaning they are excluded from the coverage of the PF Act. Hope this helps.

Regards, B. Saikumar

Nicely explained, sir.

If they are appointed as an intern in the middle of the curriculum, then this will be applicable. What if they are appointed after completing their course? Even educational institutions are not providing any letters as they are requesting internships. How can it be considered part of the curriculum? Many companies hire freshers as interns and later offer them permanent roles.

Yes, Jeeva, then the issue of whether they are interns falling within the purview of exemption under the respective Acts or employees attracting the applicability of them needs to be decided by the facts of each case. Factors such as whether they are appointed under standing orders or the Apprentices Act, the nature of their engagement, the nature of remuneration, and the tenure/length of their engagement will determine the issue.

B. Saikumar
HR & Labour Law Advisor
Navi Mumbai

Classification of Interns and Apprentices

Rightly said. It is on this basis that the Madras High Court, in Ramanarayan Mills Ltd Vs RPFC, has stated that apprentices who are treated like regular workers, in terms of both numbers and tasks performed, and who also receive production incentives, should not be classified as apprentices. This is the case even if there exists a provision in the certified Standing Orders of the company to hire apprentices, and such apprentices are excluded from EPF coverage.

Consequently, if you have several interns to whom you provide stipends, they may be regarded as regular workers, potentially hired for a limited period. If the objective is to enable students to undergo training as part of their curriculum, then why offer a stipend? Let them work without receiving any stipend.

Regards, Madhu.T.K

Internship and Labor Law Applicability

Interns hired by the querist are part of their study or syllabus. This internship is for a specific period of six months as included in their curriculum. Therefore, there is no employee-employer relationship between the interns and the party hiring them.

For the applicability of any of the labor laws, the existence of an employee-employer relationship is a must. In this case, as there is no employee-employer relationship, they cannot be covered under EPF and ESIS. The querist should establish that there is no employee-employer relationship between both parties.

Regards

Interns, stipend workers, and apprentice workers are mandatory to be covered under PF and ESIC.

It is essential to ensure that all individuals engaged in such roles are included in the Provident Fund (PF) and Employee State Insurance Corporation (ESIC) schemes to comply with legal requirements and provide necessary benefits and protection to these workers.

If a person is appointed simply as a trainee engineer (not under the Apprentice Act) for one year, are ESIC, PF, and PT applicable for deduction? Please help me.

Regards, Sharad

Trainees and Statutory Deductions

Trainees, other than apprentices, should be given ESI and PF, and their salary should be subjected to professional tax assessment.