Social security for international workers

Global careers: The Government has realised that Indian employees working abroad contribute huge sums towards social security in the overseas jurisdiction.   -  THE HINDU

Companies with globally mobile employees should ensure compliance with the Provident Fund law, just as they do for tax provisions.

Social security laws in India are not as robust or established as those in the US or other countries. In India it does not include coverage in cases of unemployment, illness and injury, old age and retirement, loss of the family breadwinner and so on. It is limited to provident fund and pension, as contributed by employees and their employer. With effect from May 2009, the Government introduced the New Pension Scheme (NPS), which aims to provide retirement benefits to those who are self-employed.

In 2008, the Government made social security scheme mandatory for cross-border workers by introducing the concept of ‘international workers’. Prior to this amendment, such workers qualified for exclusion from the Provident Fund Act. The amendment was made on a reciprocity basis, as the Government realised that Indian employees contributed huge sums towards social security in the overseas jurisdiction in which they were employed, and these benefits may not be available to them on return to India.

The definition of ‘international workers’ covers a foreign employee, holding a non-Indian passport, working for a covered establishment in India, and an Indian employee deputed to a country with which India has a Social Security Agreement (SSA).

An SSA provides continuous benefits under the social security scheme of the home country and exemption from contribution in the host country. Exemption is available in the form of ‘detachment’, under which a person covered by social security legislation in the home country will be governed only by that, provided he/ she obtains a Certificate of Coverage (COC). The COC serves as proof of social security deposit in the home country, and exempts contributions in the host country of work.

In India, international workers should contribute 12 per cent of their salary each month towards the Employees’ Provident Fund. The employer makes a matching contribution, of which 3.67 per cent is allocated towards EPF and 8.33 per cent towards Employees’ Pension Scheme (EPS). Salary includes basic wages, dearness allowance, cash value of food concession and retaining allowance.

There have been clarifications from time to time on EPF contribution by international workers. In the case of individuals with multiple country responsibilities, PF will be payable on total salary including salary payable for responsibility outside India. Furthermore, employees on a split payroll have to contribute PF on the total salary earned by them in an establishment covered in India.

On ceasing to be an employee of an Indian establishment, the international worker can withdraw the amount in the EPF account if he/ she is from an SSA country. International workers from non-SSA countries cannot withdraw until they are 58 years of age. Furthermore, withdrawal from EPS is allowed only if an international worker has 10 years of eligible service. The RBI issued a circular in June 2012 enabling foreign workers to retain Indian bank accounts to receive their bona fide dues under EPF and EPS after leaving India.

The PF law with respect to international workers is continually evolving. Companies with globally mobile employees should be aware of the provisions related to international workers and ensure compliance with the PF law.

Divya Baweja is Senior Director, Divya Agarwal is Manager, and Namita Mittal is Assistant Manager, Deloitte Haskins & Sells

Published on February 10, 2013

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