EMPLOYEES’ PROVIDENT FUND SCHEMES ROPE
Fundamental changes to Employees’ Provident Funds & Pension Schemes have been introduced for coverage of international workers. The amendments as published in the Gazette of India No.538 dated October 1, 2008 have been made relating to Employees’ Provident Fund by introducing a new category of employes known as an “International Worker” who will be required to join these schemes with effect from 1st November, 2008.
These changes will result in additional liabilities of around 24% for all affected employees and the employers.
Earlier, the participation in Employees’ Provident Funds was not mandatory where an employee’s monthly wage/salary exceeds Rs.6500. The employees who will be affected are, therefore, those working in India who are assigned from a country with which there is no social security totalisation.
• The employees qualifying as ‘international workers’ will contribute to the EPF schemes and the employers would also be required to make an equal contribution.
Like Employees’ Provident Funds Act and schemes, there will be no wage/salary ceiling for international workers.
The employees likely to be affected or benefited would include expatriates (foreign citizens) working in India and even Indian employees deputed to work abroad. With almost all expatriates being tax equalised, and the employer picking up their share of the contributions also, the expatriate assignment costs are going to increase even further.
he notification exempts international workers from those countries with which India has signed Social Security Agreements, commonly known as Totalisation Agreements, and who have been contributing to their home country social security schemes. India has currently finalised totalisation agreements with Belgium, France and Germany. The entire objective of such agreements is to ensure a level playing-field for mobile assignees. These agreements aim to protect the interests of Indian professionals by securing exemption from social security contributions in case of certain short-term assignments in the host country.
In essence, there is no impact of the amendment on the employees of the establishment who are working in the foreign countries with whom India has not signed SSA. Such employees will continue to contribute to the Social Security Schemes of the country in which they are posted but may not get any benefit out of such contribution.
The Indian employees on short term international assignments (period specified in each agreement), who are contributing to Indian PF scheme, would not be required to contribute to the social security schemes in the respective host countries.
SUM & SUBSTANCE
The amendment will apply to the establishments which employ expatriates and also depute their employees to work in foreign countries:-
Impant with respect to SSA Country
Impant with respect to non-SSA Country
Persons deployed overseas by the Indian Company / Establishment.
Contribution to be made to Indian Provident/ Pension Funds. Rate and limit to be governed by the SSA.
Employees will continue to contribute to social security benefit in the Host Country.
Expatriates deployed in India
No contribution required to be made to the Indian Provident / Pension Funds.
Contribution to be made to Indian Provident/ Pension Fund on Basic Salary, DA and Retainers Allowance.
WHAT EVERY EMPLOYER NEEDS TO COMPLY
To send to the Provident Fund Commissioner, within 15 days of the commencement of the scheme (1.11.2008), a consolidated return in such form as the Commissioner may specify of the International worker indicating clearly nationality of each and every international worker required or entitled to become member of the fund showing the basic wage, retaining allowance, if any and Dearness Allowance irrespective of wage/salary ceiling including the cash value of any food concession paid to each of such international workers. However, if there is no international worker who is required or entitled to become a member of the fund, the employer shall send “Nil’ Returns.
To send to the Commissioner, within 15 days of close of each month, a return in Form 5 of the International workers qualifying to become members of the fund for the first time during the preceding month together with declaration in Form 2 to furnish by such qualifying International workers (indicating distinctly the nationality of each and every International worker.
If there is no International worker qualifying to become member of a fund for the first time or there is no International worker leaving the service of the employer, the employer shall send a ‘Nil’ Return.
Full notifications have been published in November 2008 issue of Labour Law Reporter.