Are Trainees Entitled to PF, Gratuity, and Leave Benefits During Their Training Period?

Dear Seniors,

In many organizations, college graduates or postgraduates are appointed as trainees and are paid a stipend in which only the ESIC is deducted, and no PF. This traineeship period may last from 3 months to 1 year as per the agreement and may be extended if the management wishes to do so. They get a separate appointment letter as a trainee, which is for a fixed period (e.g., 3 months to 1 year). Post which, if they are absorbed as regular employees, then they are issued a fresh appointment with a salary. Employees during this period are not eligible for privilege leave, PF, or other benefits. Only the ESIC is deducted. Also, this period is not considered while calculating their gratuity. Please confirm if this is the right practice as per the law? Can an employee demand gratuity, PL, and PF for the traineeship period? (Please note the traineeship period is different from probation, and generally, employees need to go through a probation period after the traineeship. But in probation, they are paid a salary with PF and other benefits. So my query is only regarding the traineeship period?)

I am raising this query because I found many members mentioning that as per the law, a stipend can be paid only to an apprentice where PF is not applicable. In any other case, if a stipend is paid to a non-apprentice, then the stipend is considered as a wage in PF and the Gratuity Act, and the employer needs to pay PF contribution and gratuity for the traineeship period.

ESI & PF have to be deducted from the stipend unless your trainee program is recognized, accepted, and approved by the appropriate Government.

These trainees are eligible to get a bonus if they qualify for the same.

Dear Sir,

Which are those programs other than apprenticeship? The concept of hiring graduates as trainees is common, and they are not eligible for anything other than ESIC.

Dear Gokul,

It appears that you have not apprised yourself of the Apprentice Act, 1961. After the amendment in 2014, this act is called "The Apprentices (Amendment) Act, 2014."

Please note that persons employed under the provisions of this act are called "Apprentices" and not "Trainees." Your major confusion is on these two terms. Apprentices are not regular employees; therefore, remuneration paid to them is called a "stipend" and not "salary" or "monthly wages." Since they are not paid monthly wages, the question of payment of gratuity does not arise.

An apprentice, upon completion of training, if found suitable, can be considered for regular employment. Once they become a regular employee, statutory provisions like gratuity become applicable.

Thanks,

Dinesh Divekar
[Phone Number Removed For Privacy-Reasons]

Dear Sir,

My query is about the trainees that organizations appoint on a stipend. Fresh graduate students are taken as trainees and they are paid a stipend which makes them ineligible for benefits like PF, PL, gratuity, bonus, etc. I want to know if this is correct. This query is not about an apprentice.

Dear Gokul, I wish you had read my reply properly. Before raising the query, I request you to apprise yourself of the labor laws and use the terms and phrases correctly. This is very important in the HR field. In spite of my post with a detailed explanation, if you come up with the same query, it will surprise everybody.

Understanding Stipend and Salary

Monthly payment made to persons employed under the provisions of the Apprentice Act is called a stipend. The stipend amount is fixed by each state government. In fact, the duration of the training, tests, quantum of stipend, etc., is clearly mentioned in the acts made by the respective state government.

Salary and Trainee Designation

Any other person employed by the company is eligible to get a salary. "Trainee" is the designation used in your company. Wages and statutory deductions are not based on what designation you give. The wages paid should be minimum wages, and right from the first day onward, all the statutory deductions become applicable.

Hope you do not come with the same query again.

Thanks,

Dinesh Divekar

Dear Mr. Gokul,

As already pointed out by honorable members, you should know the difference between a stipend (payment made to students at the time of learning) and a salary. Only "Apprentices engaged strictly as per the Apprentices Act are exempted from the purview of labor laws. However, they are entitled to leave during their examinations. The amount of stipend paid to an apprentice is reimbursed to some extent to the employer. This is done to encourage employers to engage apprentices for future employment. As you stated, the majority of industries are resorting to denying statutory benefits under the pretext of "Appointment as Trainee."

You have mentioned that a trainee is covered under ESI. This is sufficient to conclude that other labor laws should also be made applicable to trainees. There are decided case laws in this connection. Please peruse the attachment, which is self-explanatory.

Hi Gokul, I am not a consultant or a trainer, so if you are not satisfied with my answer, you can very well revert. In your case, if you have a standing order and if you have defined trainees/apprentices under the classification of workmen, your practices are absolutely right and legally valid.

Definition of Employees Under the EPF Act

As per the definition of employees under the EPF Act, two classes of employees are excluded. One is apprentices under the provisions of the Apprentice Act, and the other is trainees/apprentices defined under the provisions of standing orders.

In your case, ensure your standing order has a definition of trainees/apprentices, and the length of the training period is as per the provisions. If you are clear, I repeat, do not worry, your practices are legally valid. We can challenge it in a court of law even if PF authorities question it.

Simple thing is trainees appointed under the Apprentice Act 1961 are only apprentices and eligible for stipend with ESI only. All others, while you give designation trainee or other, are eligible for salary and other legal compliances as per labor law.