Trainees in a retail store - whether we are supposed to pay them stipend, covering Min.Wage?

Hi,

Certain clarity and advice are required on the below-mentioned issues. We are a big retail format store in Kolkata. As a standard practice here, we engage "Sales-Trainees" in our store and provide them with a monthly stipend. Now, the question is whether we are supposed to pay them a stipend covering the minimum wage.

Please note that unlike Mumbai, in West Bengal, Standing Order is not a compulsion for the Commercial Establishments under the W.B. Shops & Establishment Act. Hence, we do not have a Standing Order and thereby don't have the scope for the classification of different categories of employment (like trainees, apprentices, etc.) and the declaration of their respective stipend amounts to be given.

Seeking suggestions, please.

Sir,

My question does not pertain to those trainees under The Apprentices Act of 1961. As I mentioned in my earlier communication, it is about a "Sales Trainee" who conducts retail counter sales. Since we are not involved in manufacturing (plant/works), the Apprentices Act of 1961 does not apply to us.

Kindly refer to my question.

Regards,
Debashis

Dear Debashis,

Unless the nature of the job requires a new employee to undergo formal orientation for a specified period with guidance from a senior colleague, on-the-job training may not be necessary. If a fresh employee is designated as a trainee for an extended period without substantial training needs, it may appear to be a tactic for easy hiring and firing.

In general, I believe that a counter salesman in a retail outlet, regardless of its size, only needs a week of on-the-job orientation. Their primary role involves selling products with fixed prices, minimizing the need for extensive training as they do not engage in prolonged negotiations or make independent decisions.

Regarding your mention of the selective application of statutory Standing Orders in West Bengal's Shops and Establishments, it would be helpful to provide further clarification along with any relevant government notifications.

Thank you.

Dear Sir,

During festival time, we appoint a few individuals to handle the rush of customers on a temporary basis for 3-4 months. They are not outsourced through a third party; we include them on the company's payroll, provide a monthly stipend, ensure they are covered under ESI/P.F., and give them an appointment letter (Form-X, prescribed under Rule 53, under W.B. Shops and Estab. Rules), clearly stating their temporary nature.

Once the festival season ends, their term is discontinued. We maintain a list of their names for future recruitment from that panel as needed.

Therefore, we refer to them as trainees, providing them with a stipend. The question arises whether this stipend amount should align with the minimum wage. Given their association's nature with the company, no other designation may be more suitable.

Standing orders are only applicable to industrial establishments, not shops/commercial establishments like ours. If they were applicable, we could have opted for standing orders and classified the "trainee" designation along with the stipend amount within the job classification scope.

I have attempted to provide a detailed explanation of the context and background of my query.

Now, if you or any other person can help or suggest, providing clarity to my earlier two queries, please do so.

Regards,

Debashis

Dear Debashis,

I have gone through your reply very carefully. It seems to me that your query dated 23-06-2020 and the context you have described in the last reply are different from one another. Your initial query relates to the general practice of engaging "Sales-Trainees" with a monthly stipend in your retail outlets and whether the stipend should essentially match the statutory minimum wages or not. The context explained for such engagement is the seasonal requirement, i.e., 3 to 4 months of the festival season every year. You have also admitted the practice of issuing appointment orders to such persons as per rule 53 of the WBS&E Rules, 1964 as temporary employees and their enrollment under the ESIA, 1948, and EPFA, 1952. Even after all these statutory compliance, I am not able to understand how you contend these people are "Sales Trainees" only and the remuneration paid to them is "stipend" only to avoid the payment of statutory minimum wages.

The objective and purpose of the application of the schemes under the ESI Act and the EPF Act are different from the application of the provisions of the Shops and Estts Act and the Minimum Wages Act, 1948. Strictly speaking, the coverage of such persons engaged during certain seasons under the schemes of the ESI and EPF will not, ipso facto, prove that they are trainees only.

Coming to your statement about the issuance of appointment orders u/r 53, that itself is proof that they are "employed" under a contract of employment only for hire or reward, which is the remuneration you pay them at the end of every month falling under "wages" so defined u/s 1(6) of the PW Act, 1936. Then how can you call it "stipend"?

Besides, for the purpose of obtaining registration u/s 16 of the WBS&EA, 1963, or notifying subsequent changes thereof, are you not including the number of these so-called sales-trainees?

Though the essential provisions of the PWA 1936 have been incorporated in the WBSEA, 1963, I think the former still applies to the shops and establishments, and therefore, contrary to your contention, your retail outlets with the requisite number of employees will come under the IE(SO) Act, 1946. As such, these people are temporary workmen as defined under definition clause 2(d) of the State Model Standing Orders only.

In my opinion, therefore, these temporary employees cannot be trainees, and as such, their so-called stipend is wages only and cannot fall below the statutory minimum wages fixed by the appropriate Government.

Dear Sir,

Since the category of people we recruit are freshers without any experience, they learn the job and gain experience during these 4 months. Hence, the terms "Sales Trainee" and "Stipend" are mentioned for them suitably.

Subsequently, when they are absorbed (as and when permanent vacancies arise), they are referred to as "Salespersons," and minimum wages are provided to them.

To maintain a distinction in terms of remuneration and designation between these two categories (Sales Trainee and Sales Person), we offer a stipend to the fresher group (referred to as Sales Trainee), which is lower than the minimum wage.

This is a common practice in relatively small categories of Hotels, Nursing homes, Retail shops, etc. They hire freshers as trainees in their respective fields and provide a stipend.

(Q-1) Is this a small practice in the eyes of the law?

(Q-2) Sir, you have mentioned (indirectly) that the IE(SO) Act might be applicable for Shops and Establishments as well. If so, why do all commercial establishments and corporations, instead of following a standard SO or certified SO, choose to adhere to their own company HR policy guidelines and manuals (which contain their own terms of employment such as duty hours, leave, discipline, etc.)?

I request you to clarify the two points mentioned above.

Regards,
Debashis Mukherjee

I always enjoy reading Umakanthan Sir. I salute him.

I just want to add some points over here with respect to Umakanthan Sir.

Stipend is a payment made to trainees or learners for living expenses, unlike a salary or wages which are paid to employees.

According to Washington University, to receive a stipend, the job must be focused on training rather than employment. The training must be predominantly for the benefit of the person engaged as a trainee and not for the employer. The trainee person can't be entitled to a job at the end of training. He also can't displace regular employees.

Trainees who are employed for 'hire or reward' could fall under the definition of 'employees' under the MW Act.

In some states under the MW Act by notification, stipend is paid to such trainees at the rate of 75% of the minimum wages as applicable to the unskilled category. Otherwise, the stipend is payable at 100% of the minimum wages as applicable to the unskilled category, as far as I know.

Debashis Mukherjee has to find out whether in West Bengal there is any such notification of stipend to be paid at a certain percentage of minimum wages. If it is not there, then he has to pay the stipend at 100% of the minimum wages as applicable to the unskilled category, as far as I feel.

They shall be given minimum wages, irrespective of designation as a sales trainee, which is a misnomer and a ploy to evade the law.

Most employers try to bend the laws or interpret the law as per their convenience. Sometimes knowingly, they take calculated risks. It's all business tactics to earn more profit. With a limited number of inspectors under labor laws and the illiteracy of the workforce about labor laws, unions are also not taking a keen interest in organizing such a small group of workers. The weakness of workers to save their jobs has all resulted from such tactics adopted by employers. Many employers are not maintaining a muster roll of such persons required for a short duration and paying them cash payments so that their footprints can be washed away every day. Our own fraternity advises employers to evade the law, which is unfortunate. We should appeal to employers to pay minimum wages, which is just enough for the employee to maintain their working capacity to come back to work the next day. Let the employer save on other unnecessary expenditures like maintaining high-end cars, mobile phones, and hosting five-star parties. The amount they save by not paying minimum wages is much less than the amount they waste on luxury items.