International worker and entitlement of provident fund

Know your Provident Fund’s Law:-

Being a law abiding citizen it is needful to know the law in respect of present scenario and this Mail is for day to day update of law in respect of Provident Fund, where a little update is required for continuing the employer and employee relationship and for smooth development of Industries.

'INTERNATIONAL WORKER' AND ENTITLEMENT OF PROVIDENT FUND

LAW SAYS

Foreign nationals coming to take employment in India were earlier excluded from the provisions of the EPF Act as their remunerations in most cases far exceeded above the statutory threshold limit.

On the other hand, Indian workers venturing to work overseas are subjected to all contributions to the social security fund of the country where they work, irrespective of the time spent in another country. Often, the amount so contributed would stand forfeited, since, like the Indian Provident Fund, all social security schemes are subject to long-term rules of withdrawal, causing the Indian expatriate or his employer heavy losses.

In order to create level playing field and to pressure other countries to enter into SSAs with India, International Worker is introduced as a concept and they are bound to comply with PF provisions, regardless of their remuneration break-up.

International Worker

An International worker may be an Indian citizen or a foreign national.

1. Any Indian employee working or having worked abroad in a country with which India has entered into a Social Security Agreement (SSA); OR Any foreigner who works in India in an establishment where the Employees‟ Provident Funds & Miscellaneous Provisions Act, 1952 is applicable. 

A Social Security Agreement is a bilateral instrument to protect the social security interests of workers posted in another country. Being a reciprocal arrangement, it generally provides for equality of treatment and avoidance of double coverage.

Every International Worker, other than an ‘excluded employee’ should become members of the Fund. There is no minimum period of stay in India for activation of Provident Fund compliance. Every eligible international worker has to be registered from the first date of his employment in India.

An Indian employee sent on posting to a country with which India has an SSA becomes an 'International Worker' and is required to contribute to full salary. He can, however, seek exemption from the social security legislation of the country in which he is posted on the basis of a detachment certificate issued in terms of the SSA. If an Indian employee is directly employed by a local employer abroad, such an employee shall be covered by the foreign country legislation.

All such establishments covered/coverable under the EPF & MP Act, 1952 including those exempted under section 17 of the Act) that employ any person falling under the category of ‘International Worker’ shall take cognizance of these provisions.

The provisions will apply irrespective of where the salary is paid. In case of split payroll, the contribution shall be paid to the total salary earned by the employee. The contribution is payable on the total salary payable on account of the employment of the employee employed for wages by an establishment covered in India even for responsibility outside India.

Contribution:

(a) PF for International Workers to be calculated on total wages instead of Basic and DA. Total wages means whatever the wages/salary receiving in India (includes Basic and all other allowances (HRA, Conveyance, project Allowance) and the salary/wages receiving in his/her home country.

(b) W.e.f 11-Sep-2010, Pension Fund (8.33%) to be calculated on the Total wages, whereas prior to the amendment it was calculated on Restricted Wages (Rs 6500/-)

The contribution shall be calculated on the basis of monthly pay actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis:

There is no cap on the salary on which contributions are payable by the employer as well as employee. There is no cap on the salary up to which the employer’s share of contribution has to be diverted to EPS, 1995 and the same is payable on total salary of the employee.