Apprenticeships and trainees in India
Reviewed by Mellow Editorial Team, HR & payroll content team
Hiring an apprentice or trainee in India means working within a specific legal framework — the Apprentices Act, 1961 and its amendments — that differs meaningfully from standard employment contracts. Getting the classification right matters because obligations around wages, social security contributions and compliance vary depending on which category a person falls into.
The difference between an apprentice and a trainee
These two terms are often used interchangeably, but they carry distinct meanings in Indian law.
An apprentice under the Apprentices Act is enrolled in a formal, structured programme under a designated trade or optional trade, completing practical training at your establishment alongside theoretical instruction. The central and state apprenticeship authorities oversee these programmes. Apprentices are not considered employees under most labour legislation during the apprenticeship period.
A trainee, in the broader sense, is someone undergoing in-house or on-the-job training that does not fall within the Apprentices Act framework. Their legal status depends on how the arrangement is structured — and if the engagement looks like employment in substance, labour authorities may treat it as such.
The distinction has real consequences for payroll, contributions and termination rights, so it is worth being precise from the start.
Who is required to take on apprentices?
Establishments above a certain size in manufacturing and other specified sectors are required by law to engage apprentices within a band set as a percentage of their total workforce. The exact thresholds and percentages are specified under the Apprentices Act and the Apprenticeship Rules, and they vary by industry category and establishment size.
If your establishment is covered, you are expected to register on the National Apprenticeship Training Scheme (NATS) or National Apprenticeship Promotion Scheme (NAPS) portals, depending on the type of apprenticeship. Failure to comply can attract penalties under the Act.
Smaller businesses and those outside the mandatory scope can still engage apprentices voluntarily — and many do, as a structured way to build an entry-level talent pipeline.
Stipends, wages and social security
Apprentices are paid a stipend, not a salary. The central government prescribes minimum stipend rates, which vary by year of apprenticeship and the apprentice's educational qualification. You cannot pay below these prescribed minimums.
On the social security side, the position is different from regular employment:
- EPF: Apprentices under the Apprentices Act are generally excluded from Employees' Provident Fund coverage during the apprenticeship period, since they are not classified as employees. Once the apprenticeship ends and they are retained as employees, normal EPF obligations — 12% employee contribution and 12% employer contribution — apply.
- ESI: Similarly, formal apprentices are typically outside ESI coverage during the apprenticeship period. Trainees who are treated as employees in practice may fall within ESI if they are below the applicable wage threshold.
- Income tax: Stipends paid to apprentices are generally taxable in the hands of the recipient, but TDS obligations for the employer depend on whether the payment crosses the threshold under the relevant provisions. Seek specific guidance if stipend levels are significant.
Trainees who are engaged more like regular employees — on fixed-term contracts, for instance — may attract the full range of payroll obligations from day one. The label you use matters less than the actual nature of the relationship.
Contracts, duration and completion
Every apprenticeship must be covered by a written contract of apprenticeship registered with the apprenticeship adviser. The duration depends on the trade: it can range from several months to a few years. You cannot terminate an apprenticeship early without following the process set out in the Act, and the apprentice similarly cannot simply walk away without consequence.
At the end of the programme, the apprentice receives a Certificate of Proficiency after passing the All India Trade Test. You are not legally obliged to offer them employment once the apprenticeship ends, though many employers do.
For trainees on informal arrangements, the terms are governed by whatever agreement you have in place — which is a reason to document those terms carefully in writing at the outset.
What changes under the Labour Codes
India's four consolidated Labour Codes have been in force from 2025. The Codes consolidate several legacy statutes, and while the Apprentices Act sits somewhat separately, the broader definitions of wages, working conditions and social security coverage in the Codes can affect how trainee arrangements are assessed. The definition of "worker" under the Occupational Safety, Health and Working Conditions Code, for example, is broad, and a trainee who is doing productive work under your direction may fall within its scope.
It is worth reviewing your trainee engagement structures against the new Code definitions, particularly if your trainees are on longer engagements or are performing roles indistinguishable from regular employees. How Mellow runs payroll across six countries on one platform illustrates how these classification questions play out across different legal frameworks.
Gratuity obligations also deserve a mention: gratuity becomes payable after five years of continuous service. An apprentice converted to a permanent employee starts that clock from the date of regular employment, not from the start of the apprenticeship.
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