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December 4, 2008
Additional
Compliances Under EPF Act For Employing International Workers
The Government has asked Indian companies registered with the
Employees’ Provident Fund Organization (“EPFO”)
to provide the details of the International Workers (as defined
in the Employees’ Provident Funds (Third Amendment) Scheme,
2008) employed by them. Such details have to be provided in the
prescribed form and returns need to be filed even if there are
no International Workers employed by such domestic companies.
Background
We refer to our previous HR Law hotline dated September 23, 2008
titled ‘Expatriates
to be more socially secure in India’ wherein it was
indicated that the Government was proposing to introduce a
notification whereby expatriate employees in certain cases would
have to set aside 24% of their salaries towards provident fund
contributions in India.
This notification has been issued by the Government of India
with effect from October 1, 2008 where Employees’ Provident
Funds (Third Amendment) Scheme, 2008 and the Employees’ Pension
(Third Amendment) Scheme, 2008 have been introduced (“Notification”).
As was contemplated, the Notification defines an “International
Worker” as:
(a) an Indian employee having worked or going to work in a
foreign country with which India has entered into a social
security agreement (“SSA”) and being eligible
to avail the benefits under a social security programme of that
country; or
(b) an employee who is not an Indian passport holder, working in
an establishment to which the Employees Provident Fund and
Miscellaneous Provisions Act, 1952 (“EPF Act”)
applies.
The Notification also defines an ‘excluded employee’ as an
International Worker, who is contributing to a social security
programme of his/her country of origin either as a citizen or
resident, with whom India has entered into a SSA on reciprocity
basis and enjoying the status of detached worker for the period
and terms as specified in such SSA. Currently, India has signed
an SSA with Belgium, France and Germany. Pursuant to this
Notification, all International Workers other than excluded
employees will be required to contribute to the EPFO. Further, a
member of the pension fund being an employee from a country with
which India does not have an SSA, would be entitled to withdraw
his pension benefits on the principal of reciprocity as may be
available to Indian employees in that country.
To start initiating the process, the Government has now
requested establishments to provide details of the International
Workers in a prescribed form IW-1.
Implication
There are over 4,00,000 establishments which are registered
under the EPFO1.
According to NASSCOM, the number of expatriates in India is
around 65,000. However, the Ministry of Overseas Indian Affairs
(“MOIA”) states that this figure is around
1,50,000. Due to the disparity in the numbers given by the
NASSCOM and the MOIA, it seems that this figure may not be up to
date. In order to implement this Notification, the EPFO needs to
get the exact figures of the country wise and sector wise
distribution of such International Workers who would get covered
under the EPFO. The format of the statement showing details of
employees qualifying for membership as International Workers
requires the establishment to provide the name, provident fund
account number, salary pay, nationality, passport number,
country of issue, date of issue and validity. The format of the
form is available in the EPFO website:
www.epfindia.nic.in.
In terms of returns to be filed by the establishment, it has
been clarified by the Government that where an establishment
does not employ an International Worker, it has to file a nil
return.
From the employer’s perspective, this amendment has
increased the costs associated with employing expatriates in India.
It has
also increased the administrative burden on the Company as all
companies including those which who do not employ any
International Workers, will now have to comply with the new set
of compliances under the EPF Act. However, this amendment will
certainly encourage several countries to enter into similar totalization agreements with India in order to safeguard the
interests of Indian employees working overseas as well as
expatriates working in India.
Source:
www.economictimes.com
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Radhika Iyer
& Khushboo Baxi You
can direct your queries or comments to the authors
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http://epfindia.nic.in/operational_stat.htm
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