Introduction
A significant challenge within the Indian labour market lies in the disparity between formal education and the practical skills demanded by employers. To address this critical gap, the Central Government implemented the Apprenticeship Act, 1961 ("the Act") and related rules ("the Rules") requiring establishments to engage 'apprentices' for the purpose of imparting the practical skills essential for securing and performing work within the specific industry in which the establishment operates.
In the recent past, the Central Government has demonstrated an increased focus on the enforcement of the Act. Consequently, establishments found to be in non-compliance with the Act have received official communications from the relevant authorities, seeking an explanation for the non-compliance and mandating the implementation of the Act.
This article provides practical steps for Indian businesses to implement the Act and Rules.
Points to consider prior to the implementation of the Act
The following points summarise the points to consider prior to the implementation of the Act:
- Designated Trade vs Optional Trade – The Act applies to establishments engaged in any trade, occupation, or subject field, classified as a "designated trade" or "optional trade" under the Act. Establishments that are classified under "designated trade", such as IT/ITeS companies, are mandatorily required to engage apprentices in accordance with the Act. Organisations must assess if their business is classified as a "designated trade" under the Act and engage apprentices accordingly.
- Threshold for application of the Act – Establishments employing thirty (30) or more workers (including both employees and contract workers) are obligated to engage apprentices for specified periods. Conversely, establishments with fewer than 30 workers are not subject to this mandatory requirement. Organizations must accurately track their total workforce to identify when these obligations are triggered.
- Number of apprentices to be engaged – The Act requires establishments to engage apprentices in a range between 2.5% to 15% of the total number of workers (which includes employees and contract workers) in any given financial year. The Act also provides for a range of apprentices that must be maintained on a monthly basis. Organisations must identify the number of vacancies based on the threshold and the range provided under the Act on a monthly basis and fill the vacancies on a regular basis.
- Facilities – Effective apprenticeship training necessitates adequate resources. Organizations should confirm the availability of sufficient space, qualified personnel, and necessary tools. Additionally, they must ensure that managers or supervisors responsible for training apprentices possess the required qualifications. If gaps exist, engaging additional qualified resources may be necessary.
Implementation of the Act
Once the preliminary considerations have been addressed, businesses can proceed with the practical steps for implementing the Act. The points below summarise the key obligations of organisations that are required to engage apprentices:
- Portal Registration – Currently, the approved route to engage apprentices is through the apprenticeship portal. This portal allows organisations to input the requirements and basic qualifications for the particular apprenticeship position and allows them to shortlist candidates for the same. In order to access the portal and select candidates, organisations are required to register.
- Contract of Apprenticeship – All organisations are required to engage apprentices only through a contract. The portal allows automatic generation of a contract based on data provided to it.
- Curriculum – The training provided to apprentices should follow a structured curriculum. For "designated trade", the curriculum and duration of the apprenticeship programme are prescribed by the Central Government. For "optional trade", organisations have the flexibility to design the curriculum and obtain approval from the relevant authorities. The basic structure of the curriculum for both "designated trade" and "optional trade" should consist of (i) basic training, which is meant to provide theoretical knowledge; and (ii) on-the-job training, which is meant to provide practical skills.
- Key compliance during the training period – Throughout the apprenticeship period, organisations are required to follow key compliances, which focus on well-being and fair treatment of the apprentices and include (i) adhering to the minimum stipend payment fixed under the Act; (ii) ensuring compliance with the prescribed working hours, leaves and other health and safety regulations; and (iii) diligently maintaining records of apprentice attendance, progress, and stipend payments, and filing regular (e.g., quarterly) returns, as required.
Conclusion
Beyond merely fulfilling a mandatory compliance requirement, engaging apprentices under the Act offers significant strategic advantages for businesses. It enables organisations to cultivate a skilled talent pipeline, allowing them to assess and, subsequently, absorb well-trained individuals into their workforce upon the successful completion of their apprenticeship. This not only addresses immediate skill gaps but also contributes to long-term talent development and reduced recruitment costs, making it a win-win scenario for both businesses and the nation's youth.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
