Epf ppt (international workers )

Recent Amendment to
Provident Fund Rules for
International Workers
Ernst & Young Webcast
21 December 2010

Provident Fund for International WorkersPage 2December 2010
Contents
► International Worker and Provident Fund
► International Worker and Provident Fund: Change in Law
► Social Security Agreements: Impact
► Concluding thoughts

International Worker and Provident Fund

► In October 2008, the Government of India issued notifications* extending the
applicability of Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 to a new category of workers called „International Workers‟
requiring such „International Workers‟ to contribute into its schemes effective
November 1, 2008.
► The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is
Indian equivalent of social security seen elsewhere in the world.
► The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
comprises of the following schemes:
► Employees' Provident Funds Scheme, 1952 („Provident Fund Scheme‟);
► Employees‟ Pension Scheme, 1995 („Pension Scheme‟);
► Employees‟ Deposit Linked Insurance Scheme, 1976.
* Notifications no. G.S.R. 705(E) and G.S.R. 706(E)

► Establishment employing 20 or more persons
engaged in specified / notified industry;
► Establishment employing even less than 20
persons can opt to be covered voluntarily under
the Act.
► International Workers contributing to the social
security of their country of origin, with whom India
has entered into a Social Security Agreement and
enjoying the status of a detached worker.
Excluded
Employee
Covered
establishment
► Non Indian employees, not holding an Indian
passport, working for an establishment in India to
which the Provident Fund Act applies;
► Indian employees having worked or going to
work in a foreign country with which India has
entered into a Social Security Agreement.
International
Worker

► In addition,
Government of India
contributes to Pension
Scheme: 1.16% of Rs.
6,500 per month.
► Contribution made by
employer allocable as
follows:
► 12% as employee‟s
contribution to
Provident Fund;
► 8.33% of Rs. 6,500 per
month as employer‟s
contribution to Pension
Scheme;
► Balance as employer‟s
contribution to
Provident Fund.
► Employer is required to
contribute 24% of the
employee‟s „Monthly
Pay‟ in the Provident
Fund Scheme and
Pension Scheme.
► Employer has an
option to recover 12%
of the employee‟s
„Monthly Pay‟ from his
salary.
Contribution

► Withdrawal permitted under the following circumstances:
69(1) ------------
69(2) On ceasing to be an employee in a covered establishment provided
he has not been employed in any other covered establishment for at least
two months before making an application for withdrawal to Provident Fund
Authorities.
► The ability to withdraw from Provident Fund supported by the following:
► Clarification issued by the Provident Fund Authorities: “The full amount
standing to the credit of a member‟s account is payable if any one of the
circumstances mentioned under Paragraph 69 of the Provident Fund Scheme is
fulfilled.”
Withdrawal from Provident Fund

Pension Benefit
► As per the provisions of the said
Social Security Agreement.
► As per the principle of reciprocity.
International Worker covered under
Social Security Agreement
International Worker not
covered under Social Security
Agreement
► Practically, in the absence of Social Security Agreement between India
and the home country, International Worker ends up loosing contributions
made to Pension Scheme.
► Maximum loss of contribution capped at Rs. 6,500 (USD 145) annually.

International Worker and Provident Fund: Change
in Law

Provident Fund for International WorkersPage 10December 2010 Provident Fund for International WorkersPage 10December 2010
► Not available to International
Workers (except under certain
conditions).
► Contribution to Pension no longer
capped at 8.33% of Rs. 6,500 per
month.
► Not possible until retirement or
reaching 58 years of age,
whichever is later.
► Bank account in India pre-
requisite for obtaining refund from
Provident Fund Authorities.
Refund from Provident FundProvident Fund Withdrawal
ContributionPension Benefit
Key Changes in
Notifications*
issued in
September 2010
in Law
* Notification no. G.S.R. 148 and G.S.R. 149

Old Age
► On retirement or
attaining the age of
58 years, which
ever is later.
Disability
► On permanent and
total incapacity;
► On suffering from
tuberculosis,
leprosy or cancer.
Reciprocal Terms
► On grounds
specified in the
relevant Social
Security Agreement
under which the
International
Worker is covered.
Accumulated balances in Provident Fund account will be not be
refundable until the International Worker retires after attaining the age of
58 years.
Provident Fund Withdrawal
in Law

► As per the terms of said Social
Security Agreement entered
into between India and home
country of International Worker.
► By deposit in the International
Worker‟s Indian bank account.
International Worker covered
under Social Security Agreement
International Worker not covered
Refund from Provident Fund Authorities
Bank account in India will be a pre-requisite for obtaining refund from
Provident Fund Authorities. However, exchange control regulations
restrict foreign nationals to maintain bank account in India.
in Law

► To determine eligibility towards
pension benefit, periods covered
in both countries will be totalized.
► If such totalized period is less
than 10 years, will be entitled to
pension benefit as per „Table D‟
of the Pension Scheme.
International Worker not covered
International Worker covered
► Will not be entitled to any
pension benefit under the
Pension Scheme.
Pension Benefit
Where International Worker is not covered under Social Security
Agreement or has rendered less than 10 years of service in India, 8.33%
of the „Monthly Pay‟ will end up as sunk cost.
in Law

► Employer contribution of 12% will be allocable as
follows:
► 3.67% to Provident Fund Scheme;
► 8.33% to Pension Scheme.
Employer
contribution to
Pension
► Government will no longer contribute to an
International Worker‟s Pension Scheme.
Government
contribution to
Pension
► Telegraphic transfer buying rate offered by State
Bank of India as on the last working day of the month
for which the salary is due.
Exchange rate to
be used
Contribution
in Law

Text
► Provident Fund money
stuck until retirement
or reaching 58 years of
age, whichever is later
► Risk of recovery where
assignment ended
before 3 Sep 2010 but
refund not received
► Requirement to
maintain bank account
in India (except in
certain circumstances)
► Loss of Pension
contribution (except
in certain
circumstances)
► Private provident
fund trust which
have already granted
refund under earlier
rules
► Risk of recovery of
loans given by
employers in the
past
Practical
Challenges
/ Issues
in Law

Aim of recent changes
in Law
Persuade Foreign Governments to enter into
Social Security Agreements with India to create a
level playing field for Indians working overseas so
that they do not lose their social security
contributions made while working overseas

Denmark
Luxembourg
Hungary
Germany
Czech
Republic
South
Korea
Switzerland
Netherlands
Norway
France
Belgium
Social Security
Agreements signed by
India so far...
Social Security Agreement signed but not yet ratified
Social Security Agreement signed and ratified
in Law

Social Security Agreements: Impact

Detachment-
Certificate of
Coverage
Exportability
of Benefits
Equality of
Treatment
Totalization
of Insurance
Period
Social
Security
Agreements
Social Security Agreement: Impact

Detachment – Certificate of Coverage
► Foreign passport holders can obtain certificate of coverage in home country
and claim exemption in India.
► Indian passport holders can obtain certificate of coverage in India and claim
exemption in foreign country.
► Permanent Establishment exposure vs. Social Security exemption needs to
be analyzed.

Equality of Treatment
► Persons who ordinarily reside in either country to receive equal treatment with
the nationals of that country in the application of the social security legislation.
► No specific provisions in the Social Security Agreements on withdrawal from
Provident Fund Scheme. Analysis of practical implementation to be made of
Article on „Equality of Treatment‟.
Export of Benefits
► Provision for payment of benefits to the International Workers irrespective of
the location (India, home country or a third country).

Totalization of Periods
► International Workers who have contributed to social security in both
countries are eligible to aggregate periods covered in both countries to
determine eligibility to pension benefits in either country.
► Aggregation of periods are permissible only for determining eligibility and not
for the purpose of determining actual level of benefit payable.
► Pension benefit available to International Workers under the Pension Scheme
even where totalized period of contribution in Indian and home country social
security is less than 10 years.

Social Security
Agreement
Detachment
Equality of
Treatment
Export of
Benefits
Totalization of
Periods
Belgium a a a a
Germany a r r r
France a a a a
Norway a a a a
Denmark a a a a
Netherlands a a a r
Switzerland a r a r
Hungary a a a a
Czech Republic a a a a
South Korea a a a a
Luxembourg a a a a

Concluding thoughts

► Political backdrop to the amendments seen as “national interest” and
“national interest” will prevail over equality for foreign nationals.
► Increased cost of sending foreign nationals to India.
► Need to persuade other countries (US, UK, Australia) to enter into Social
Security Agreements with India.
► Initiate Policy Advocacy - Lobbying / formal representation to Indian and
overseas Governments.
Concluding thoughts

Questions & Answers?

© 2010 Ernst & Young. All Rights Reserved.
Ernst & Young is a registered trademark.
www.ey.com/India
Ernst & Young Pvt. Ltd.
“This Presentation provides certain general information existing as at the time of production. This
Presentation does not purport to identify all the issues or developments pursuant to the
transaction. Accordingly, this presentation should neither be regarded as comprehensive nor
sufficient for the purposes of decision-making. Ernst & Young does not undertake any legal
liability for any of the contents in this presentation. The information provided is not, nor is it
intended to be an advice on any matter and should not be relied on as such. Professional advice
should be sought before taking action on any of the information contained in it. Without prior
permission of Ernst & Young, this document may not be quoted in whole or in part or otherwise
referred to in any documents.”
Thank you

Epf ppt (international workers )

More Related Content

What's hot

Similar to Epf ppt (international workers )

Recently uploaded

Epf ppt (international workers )