Is ESI or PF Required for a 3-Month Trainee on a Rs. 15,100 Stipend?

For taking a trainee on stipend for a duration of 3 months, would it be applicable for ESI or PF? The stipend is Rs. 15,100 per month. The training may be extended or terminated after 3 months. Otherwise, the trainee may be absorbed into roles in which case PF will be paid if above Rs. 21,000.

Dear Milee, you have provided information about hiring trainees in your organization. However, what is your query? The only thing that I find anomalous is the usage of the word "stipend." A stipend is paid under the provisions of the Apprentice Act 1961. The minimum amount is decided and revised every year by the government. However, employers have the liberty to pay more than what is stipulated. Stipends are paid to apprentices. They are not employees, either regular or contractual. Provisions of the ESI Act are applicable to apprentices.

On the other hand, a salary is paid to employees. An employee could be regular, temporary, fixed-term, or contractual. The rules for payment of monthly salaries are governed by the Payment of Wages Act, 1936, Shops and Establishment Act, or Factories Act, etc.

In your case, you are not hiring apprentices under the provisions of the Apprentice Act; hence, the usage of "stipend" is improper. What trainees will receive is a salary.

Thanks,
Dinesh Divekar

Dear Milee,

In addition to the above, if any trainee comes under a training scheme approved along with your company's standing order, they are not treated as on-roll employees and are not entitled to any benefits such as PF, ESI, and Bonus. However, they are covered under the accidental insurance act.

With specific reference to your post, "Else the Trainee may be absorbed in roles in which case will pay PF above 21k," you are recruiting employees initially as "Trainees" with a stipend. Some of the trainees fall under the definition of an employee under EPF & ESI, warranting coverage under the relevant Acts. Only apprentices appointed under The Apprenticeship Act and interns undergoing internships during their studies are exempted from coverage under EPF & ESI.

You are recruiting trainees for your regular work; consequently, they fall under the definition of an employee.

Dear Srinath,

You have written that the stipend paid to the apprentices under the provisions of the Apprentice Act is exempted from PF and ESI. I had a similar view earlier. Nevertheless, it was corrected about five years ago by another member of this forum. Please check the following link to refer to the reply: https://www.citehr.com/423069-differ...ml#post1917634

Thanks,

Dinesh Divekar

Dear Dinesh Sir, you are right. As per ESI (Amendment) Act, 2010
 APPRENTICES COVERED:  
Benefits under the scheme have also been extended to Apprentices and Trainees Employed under Apprentices Act and Standing Orders Act.
For the information of all concerned, said ESI Act is attached herewith.Error is regretted