Hello, I need help in understanding the eligibility for interns - We hire them from college / passed out of college for a period of 6 - 9 months as interns and then convert them to full time employees based on their performance. During this time we pay them only monthly stipend. My queries are: 1. Should we pay them PF /ESI / Annual Bonus and /or other statutory benefits? 2. For gratuity eligibility, should we consider the tenure during internship? Look for some guidance in this regard

1. depends on the salary 2. I don’t think so - good question. @Rohan Mankad?

@srividya gopakumar If the interns are paid stipend then they will not have statutory deductions, it will only be TDS. Gratuity will start only from the time he/she has been converted to FTE

Hi Srividya, it depends what state you are registered in as per the Karnataka S&E act they don't have a separate definition of an intern, in the eyes of the law and the act the employment is permanent so to answer your questions 1. Yes depending on the salary - bonus is dependant on your policy 2. For Gratuity, internship duration is also counted

Thanks @Rohan Mankad, @Kartik Mandaville & @Karthik Ingarsal: Need more clarification here: We come under Karnataka S & E and the stipend is 15,000 p.m. So we must pay 12% as PF+ 3.25% as ESI, right? What about statutory bonus as the base is less than 21k? Also, what would be the scenario if the interns (same stiend) are in Chennai and governed by the TN law?

I am not sure about the TN law you can refer to simplaince for the S&E act of TN law. Yes if the base stipend is less than 21,000 bonus and ESI will kick in - further you can also convert this into a consultancy in this case only TDS deduction is applicable and not statutory deductions

Fine, thanks once again @Rohan Mankad

Hey 👋 1. The payment of any compliance related benefit (PF, ESI, Gratuity) is based on one major factor - what is your payroll/accounting team showing them in the books. Many companies show them as Contractors or Consultants as their tenure and scope of work is pre-defined. If you can provide the answer to the same, I’ll be able to guide. 2. Annual Bonus is a management decision. It may be decided on their discretion.

Thanks @Wristy: Let me check with the Fin team and get back

If this is a query raised by the auditors always better to pay the dues and get it cleared instead of leaving a chance of ambiguity

@Rohan Mankad: Auditors have not specifically mentioned to pay or not to pay. Since we have decided to pay, I want to know if we need to pay the employees who have left us, but part of FY 22-23

Ideally yes. Since it is statutory component

If it is a part of statutory component, which depends under which industry and skill set the business is registered in India, then it is a mandate. However, if it is a regular annual bonus paid by the company in lieu of performance, it is at management discretion. Also, as an Auditor, a lot of questions are asked and recommendations are provided. However, some of these are compliance driven, while others are best practices or suggestions. It is good to have a clarity always with them.

@Rohan Mankad @Wristy Thank you for the inputs. This really helps!