To develop a workforce of world-class competence, skilling and upskilling is the sine qua non. Towards this endeavour, the Government of India has taken an initiative in collaboration with All India Council for Technical Education (hereinafter referred to as “AICTE”) and in this exercise emerged is the National Employment Enhancement Mission (hereinafter referred to as “NEEM”) Scheme to impart on-the-job training (OJT) to eligible candidates to enhance their employability. For this purpose, the AICTE had exercised its power under Section 23(1) read with Section 10 of the AICTE Act, 1987 and in supersession of the AICTE Regulations, 2013, the AICTE had made the All India Council for Technical Education [National Employability Enhancement Mission (NEEM)] Regulations, 2017 (hereinafter referred to as “the AICTE NEEM Regulations, 2017”).
The objective of this Scheme is specified under Regulation 2.1 as follows:
The objective of National Employability Enhancement Mission is to offer on the job practical training to enhance the employability of a person either pursuing his or her postgraduation/graduation/diploma in any technical or non-technical stream or has discontinued studies after Class 10th to enhance his or her employability.
Under this Scheme, establishments can induct trainees under the NEEM Scheme and engage them under the OJT programme and after the completion of the programme, there is no compulsion on the establishments/organisations to provide the said trainees fixity of tenure in their respective organisations. The training period ranges from 3 months to 3 years and should be National Skills Qualifications Framework (NSQF) compliant.
The trainees under the NEEM Scheme are regulated by a facilitator. The NEEM facilitator shall be in the business of training for at least five years. A person registered under the NEEM Regulations is called a trainee under NEEM. A contract needs to be signed between NEEM facilitator and the NEEM trainee to capture all terms and conditions which would govern the relationship. The NEEM training shall be deemed to have started from the date of joining of the NEEM trainee. The NEEM contract shall not be either an offer of employment or a guarantee of employment. The duration of NEEM training shall be determined by the nature of industry or trade where a NEEM trainee would be engaged in such training and shall be at the sole discretion of NEEM.
In accordance with Regulations 15.1 and 15.2 of the AICTE NEEM Regulations, 2017, the NEEM facilitator shall pay the enrolled NEEM trainees a stipend which shall be at par with the prescribed minimum wages for unskilled category. The said stipend shall be paid as single consolidated amount and such payment will not attract any statutory deductions or payments applicable to regular employees, namely, provident fund (PF)/Employees’ State Insurance (ESI)since the NEEM contract assures training and does not constitute employment.
Even prior to the advent of the AICTE NEEM Regulations, 2017, the Employees’ Provident Fund Organisation (EPFO) Head Office vide their Circular Coord/40 (5) 2015/Misc/Clarification/ 27300 dated 12-10-2015, has clarified that in the matter of student trainees of educational/technical institutes recognised by Central/State Government or any authority constituted by them, there is no employer-employee relationship between the industry and the student trainee who is on industrial on-the-job training. Therefore, payment of stipend, if any, provided by the industry to such student trainees do not attract the provisions of the EPF Act. However, it was clarified that so far as the students getting placement in companies and appointed as employees of establishments, the EPF Act will be applicable on such employees even during the on-the-job training after becoming an employee.
In contra, the EPFO Head Office vide their Circular ACC (HQ)/ACC dated 24-2-2022, clarified as under:
- The NEEM trainees are not exempted from the definition of “employee” under Section 2(f) of the EPF Act.
- Under Para 26-B of the EPF Scheme, the Regional Provident Fund (RPF) Commissioner has been vested with the power to decide whether an employee is entitled to or required to become a member of the Scheme after ascertaining the facts and circumstances of the case.
- Cases of subterfuge shall be distinguished from genuine arrangements for training.
- Any question whether a person is a trainee or employee may be decided as per the law and considering the Circular dated 12-1-2015.
Hence, the questions whether the NEEM trainee should be treated as an “employee” under the EPF Act and whether the RPF Commissioner is having the power to decide that matter under Para26-B of the EPF Scheme and all the more the construction of Section 2(f)of the EPF Act, assume significance.
Section 2(f) of the EPF Act which defines the term “employee” reads as under:
2.(f). “employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who get his wages directly or indirectly from the employer, and includes any person—
- employed by or through a contractor in or in connection with the work of the establishment;
- engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 or under the Standing Orders of the establishment.
It is pertinent to note that by virtue of an Amendment Act dated 1-8-1988 (Act 33 of 1988) the words “and includes any person” and the two sub-clauses to this section were incorporated. Against this scenario, it may be noted that the AICTE NEEM Regulations were brought into force only in 2017. Hence, the definition does not speak about NEEM trainees.
In Regional Provident Fund Commr. v. Central Arecanut & Coca Mktg. and Processing Coop Ltd., the Supreme Court has categorically held that if the trainees were paid stipend during the period of training and neither they had any right to employment nor any obligation to accept employment if offered by employer, therefore they were engaged under the Standing Orders and they were specifically excluded from the definition of employee under Section 2(f) of the EPF Act. In view of the above authoritative decision of the Supreme Court, it is inappropriate to construe the NEEM trainee as “employee” under Section 2(f) of the EPF Act.
About Para 26-B of the EPF Scheme, in Express Publication (Madurai) Ltd. v. Regional Provident Commr. II, the Kerala High Court has held that the Regional Provident Fund Commissioner is competent to determine the employee-employer relationship and to determine whether a particular employee comes under the definition of “employee” as defined under the EPF Act.
As elaborated in the second paragraph of this article, the nature of the NEEM Scheme is very much unique wherein the contract will be between the facilitator and the NEEM trainee, and the NEEM trainee will be deputed to an establishment for on-the job training. The said trainee will undergo training in the said establishment for a prescribed period and after the completion of the traineeship programme, there is no obligation on the part of the establishment to absorb him as a full-time employee and the said trainee also does not have a reciprocal obligation to accept the offer if given by the establishment.
In addition to the above, the NEEM trainee is entitled to only stipend during the traineeship programme and that too will be paid by the facilitator and not by the establishment wherein he or she is undergoing training. Hence, it is clearly established that there is no employee-employer relationship between the NEEM trainee and the establishment concerned.
Without prejudice to the above contention, the NEEM Scheme is a creature of the AICTE Act and as such in the event of any subterfuge, the AICTE alone should abrogate the registration made by the NEEM facilitator and as a natural consequence, the approval given to them by the AICTE as NEEM facilitator will be cancelled.
Finally, when Section 2(f) of the EPF Act defines the term “employee” in such a way to exclude the apprentices under the Apprentices Act, 1961 and the apprentices/trainees under the Standing Orders of the establishment and in view of the authoritative decision of the Supreme Court in Central Arecanut case, invoking Para 26-B of the Scheme under Employees’ Provident Fund Scheme, 1952 is not at all feasible and far-fetched.
In any case, assuming that if there is a subterfuge and the payment of employees’ provident fund contribution on NEEM trainees is adhered to, will it allow AICTE to remain as a silent spectator and allow the facilitator to continue as a NEEM facilitator?
*Chief Human Resource Officer, Global HR, Automotive Robotics (India) (P) Ltd. Author can be reached at email@example.com.
All India Council for Technical Education Act, 1987, S. 23(1).
All India Council for Technical Education Act, 1987, S. 10.
All India Council for Technical Education [National Employability Enhancement Mission (NEEM)] Regulations, 2013.
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, S. 2(f).
Employees’ Provident Funds Scheme, 1952, Para 26-B.
Apprentices Act, 1961.
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, S. 2(f).
 Employees’ Provident Funds and Miscellaneous Provisions (Amendment) Act, 1988.
(2006) 2 SCC 381.
2013 SCC OnLine Ker 6852.
(2006) 2 SCC 381.