Understanding PF Coverage for International Workers: What Are Your Obligations and Benefits?

Dear all,

I have doubts about the recent amendment on PF coverage for international workers.

1. Whether international workers would be compulsorily liable to participate in the PF scheme regardless of their basic salary.

2. If they are liable, whether PF has to be deducted on the actual basic + DA or if they have the option to contribute only Rs. 6500.

3. What are the pension-related provisions for international workers?

4. What will be the maturity benefits for international workers when they leave India within a short time, say 2-3 years?

Best regards,
Raghu

For international employees working in India, there is no cap on the salary on which contributions by the employee and employer are payable. However, the same cap of Rs 6500, as applicable to Indian employees for the payment of contributions to the Employees' Pension Scheme and Employees' Deposit Linked Insurance, also applies to international employees.

Pay for this purpose also includes basic salary, dearness allowance, and retainer allowance, if any. The same provisions for pension that are applicable to Indian employees will also apply to international employees. The maturity benefits will be the same as those applicable to Indian employees. Therefore, if an international employee leaves employment in India, they can have withdrawal benefits as provided in the Act (Scheme 69).

Regards,
Madhu.T.K

Thanks, Madhu, for clarifying.

In that case, do you mean that if the basic salary, DA, and Retainer allowance (all put together) of an international worker are Rs. 1 Lakh, then the PF should be 12% of Rs. 1 lakh, or can it be Rs. 780, which is 12% of Rs. 6500?

There is no cap on salary for the purpose of EPF, but a cap of Rs. 6500 is there for the Pension Scheme. If the salary is Rs. 1 lakh, the PF contribution should be Rs. 12,000, whereas the Pension Fund contribution by the employer should be restricted to Rs. 541 (8.33% of Rs. 6500). The equating amount of Rs. 11,459 (12,000 - 541) payable by the employer should be deposited in the PF account (A/C No 1).

Regards, Madhu.T.K

Dear Mr. Raghu,

Please go through the attached details; it will help you.

From- Vijay Vashisth

Hi Madhu,

I am not able to understand what a retaining allowance is and what all is covered under this head?

Secondly, the components of the salary in my company are: Basic, HRA, professional development allowance, soft furnishing allowance, and entertainment allowance, the sum of which is the gross salary. We also have medical and flexible reimbursement.

Can you please explain on what basis PF would be deducted from international employees' salaries?

Retaining Allowance is a special allowance paid to an employee who is discharging a duty with some special skill. It will be an arrangement with the employer that an amount should be paid in addition to the normal salary applicable to the particular grade of employees. In other words, it is an additional amount paid/payable to retain a skill of a special nature.

Professional Development allowance may not be treated as a retaining allowance since it is paid for improving the quality of manpower and not for 'retaining' an employee who can only discharge a particular kind of work. In your pay structure, only the basic salary will qualify for PF.

Regards,
Madhu.T.K