Is It Legal to Pay a Stipend Below Minimum Allowance in Gujarat? Seeking Advice

At one of the apparel manufacturing companies, about 200 persons are working. They are on training and being paid a stipend.

My query:
The amount of stipend paid is less than the Minimum Allowance (MA) declared by the Government of Gujarat. Is this okay? Since a stipend is paid, no Provident Fund (PF) act is attracted. Is this okay?

Appreciate your early response.

Stipend cannot be compared with wages or minimum wages. The amount of stipend paid is less than the Minimum Allowance (MA) declared by the Government of Gujarat. Is this OK? Please upload details of the stipend paid and the MA declared by the Government of Gujarat. Please upload your appointment letter for determining the applicability of the Employee Provident Fund (EPF).

If the persons are trainees appointed either under The Apprentice Act or under The Industrial Employment (Standing Orders) Act, they will not come under the purview of the Employees' Provident Funds and Miscellaneous Provisions Act; otherwise, PF will apply.

P. S. Lakshmanan

Dear Mr. Lakshmanan,

Please elaborate on how a "Trainee" can be appointed under "The Apprentices Act."

Thank you.

Background of the present amendment to The Apprentice Act

The Apprentice Act was enacted in 1961 and came into force on 01.03.1962. Initially, the Act envisaged the apprenticeship training of trade apprentices. The Act was amended in 1973 and 1986 to include training of graduates and technicians and technician (vocational) apprentices respectively under its purview. It was once again amended in 1997 and 2008 to amend various sections of the Act regarding the definition of “establishment” and “worker,” reservation for candidates belonging to Other Backward Classes, etc., although ATS (Apprentice Training Scheme) has been in operation for over four decades.

Now, taking into consideration the Union Government’s focus on National Skill Development, it was felt necessary to amend the Act once again. An Inter Ministerial Group (IMG) was constituted, and its three meetings were held under the Chairmanship of the Director General of Employment and Training/Joint Secretary to finalize the recommendations for changes in the Apprentices Act, 1961.

Accordingly, the Apprentices (Amendment) Act, 2014, with massive amendments to various provisions of the Principal Act, was published in the official Gazette on 5th December 2014, and it came into force with effect from 22nd December 2014.

According to the new amendment under Section 8 (1), the Central Government shall prescribe the number of apprentices to be engaged by the employer for designated trade and optional trade. While fixing the number of apprentices, the Government will keep in mind the IMG’s recommendation that within a financial year, each establishment should not engage apprentices less than 2.5% and not more than 10% of the total workers of all trades. Further, the establishments may be given flexibility to take into account seasonality in operation, and establishments may engage apprentices as per apprenticeship months within the above limits. There will not be any requirement for a survey of establishments for fixing the number of seats.

By virtue of the Amendment to Section 2 (ii) for clauses (e), (j), and (k), Engineering and Technology falls under the definition of “Designated Trade and Optional Trade.”

The amendment to Section 2(ii) for clauses (e), (j), and (k), reads as follows:

Section 2 (ii) for clauses (e), (j), and (k), the following clauses shall respectively be substituted, namely:

(e) “designated trade” means any trade or occupation or any subject field in engineering or non-engineering or technology or any vocational course which the Central Government, after consultation with the Central Apprenticeship Council, may, by notification in the Official Gazette, specify as a designated trade for the purposes of this Act;

(j) “graduate or technician apprentice” means an apprentice who holds, or is undergoing training in order that he may hold a degree or diploma in engineering or non-engineering or technology or equivalent qualification granted by any institution recognized by the Government and undergoes apprenticeship training in any designated trade;

(k) “industry” means any industry or business in which any trade, occupation, or subject field in engineering or non-engineering or technology or any vocational course may be specified as a designated trade or optional trade or both;

(iii) after clause (l), the following clauses shall be inserted, namely:

(ll) “optional trade” means any trade or occupation or any subject field in engineering or non-engineering or technology or any vocational course as may be determined by the employer for the purposes of this Act;

Please go through the Apprentices Act and the relevant Rules framed therein and also the subsequent amendments that have taken place. A copy of the Gazette Notification notifying the Apprentices (Amendment) Act, 2014, which came into force from 22nd December 2014, is attached herewith.

Regards, P S Lakshmanan

Thank you for your valuable contribution.

Understanding Apprentices and the PF Act

What I understood from the above is that apprentices do not come under the purview of the PF Act. They need to be paid only the stipend decided by the government.

Query on Piece Rate Employees

I have one more query. If there are two employees working on a piece rate basis, we need to pay them the minimum wages declared by the government from time to time. If one employee is making 100 pieces in 8 hours and another is making 90 pieces in 8 hours, can we deduct a certain amount for not meeting the target of 100 pieces/8 hours? Or can you suggest a method by which we can deduct some amount that would motivate them to reach the target of pieces per 8 hours?