No PF or ESI for Apprentices Engaged under the Apprentices Act
October 23, 2026
151
Apprentices engaged under the Apprentices Act, 1961 — including under NAPS and NATS — are not “employees” under the Code on Social Security, 2020. No PF or ESI enrolment or contribution is required on their stipend during the apprenticeship. The Ministry of Skill Development & Entrepreneurship (MSDE) has confirmed this in an Office Memorandum to all establishments engaging apprentices under the Act.
| Particular | Details |
|---|---|
| Issuing authority | Ministry of Skill Development & Entrepreneurship, Apprenticeship Training Division |
| Reference | OM No. AP-22/4/2026-NAPS (E-80730) |
| Date | 21 October 2026 |
| Signed by | V.S. Arvind, Director (AT) |
| Addressed to | All establishments engaging apprentices under the Apprentices Act, 1961 |
What the OM says
The OM rests on two provisions: Section 18 of the Apprentices Act, 1961 and Section 2(26) of the Code on Social Security, 2020.
| Para | Clarification |
|---|---|
| 2 | Under Section 18 of the Apprentices Act, 1961, an apprentice is a trainee and not a worker, so laws relating to regular employees do not apply to them. |
| 3 | The Code on Social Security, 2020 subsumes the EPF & MP Act, 1952 and the ESI Act, 1948, and is in force from 21 November 2025 (MoLE notification S.O. 5319(E) dated 21.11.2025). PF (Chapter III) and ESI (Chapter IV) are now governed by the Code. Section 2(26) defines “employee” to exclude an apprentice engaged under the Apprentices Act, 1961. |
| 4(a) | Apprentices under the Act, including under NAPS and NATS, are not “employees” under the Code. PF and ESI do not apply, and no enrolment or contribution is required on the stipend during the apprenticeship. |
| 4(b) | The exclusion applies only to apprentices engaged under the Act with a contract of apprenticeship registered on the apprenticeship portal. Trainees or apprentices engaged otherwise, including under the establishment’s standing orders, are not covered by this clarification; the Code applies to them. |
| 4(c) | If an apprentice is later engaged as a regular employee, the Code applies from the date of that employment. |
| 4(d) | The PF/ESI exclusion does not dilute obligations under the Apprentices Act, 1961 and the Apprenticeship Rules, 1992. |
| 5 | Establishments are encouraged to voluntarily extend certain benefits to apprentices as good HR practice, industry standard or training policy. |
Who falls outside PF and ESI — and who does not
The deciding test is a contract of apprenticeship under the Act, registered on the apprenticeship portal.
| Person engaged as | PF and ESI under the Code |
|---|---|
| Apprentice under the Apprentices Act, 1961 (NAPS or NATS), contract registered on the portal | Not applicable — no enrolment or contribution on the stipend |
| Apprentice without a contract registered on the portal | Outside this clarification — the OM’s exclusion requires a registered contract |
| Apprentice or trainee under the establishment’s standing orders | Applicable as per the Code |
| Trainee engaged in any other way, not under the Act | Applicable as per the Code |
| Apprentice later taken on as a regular employee | Applicable from the date of regular employment |
What employers still owe apprentices
The PF and ESI exclusion does not reduce any obligation under the Apprentices Act, 1961 and the Apprenticeship Rules, 1992. Establishments must continue to:
- Pay the prescribed stipend
- Provide health, safety and welfare measures
- Honour the other terms of the contract of apprenticeship
Then vs now: the apprentice exclusion before and under the Code
The Code’s exclusion is narrower than the old EPF Act’s. Section 2(f) of the EPF Act, 1952 also excluded apprentices engaged under the establishment’s standing orders, as the Supreme Court confirmed in 2006. The ESI Act had already dropped that standing-orders exclusion from 1 June 2010.
| Apprentice engaged under | EPF Act, 1952 — s.2(f) | ESI Act, 1948 — s.2(9), from 1 Jun 2010 | Code on Social Security, 2020 — s.2(26) |
|---|---|---|---|
| Apprentices Act, 1961 | Excluded | Excluded | Excluded |
| Establishment’s standing orders | Excluded | Covered | Covered |
The practical effect is on PF: standing-orders trainees who were outside PF before 21 November 2025 now fall within PF coverage under the Code, subject to its other conditions. Para 4(b) of the OM confirms this.
Please find attached the official notification: