INTERNATIONAL WORKERS (IWs) UNDER THE EMPLOYEES’ PROVIDENT FUND SCHEME, 1952 AND THEIR COMPLIANCE-Interesting read
INTERNATIONAL WORKERS (IWs) UNDER THE EMPLOYEES’
PROVIDENT FUND SCHEME, 1952 AND THEIR COMPLIANCE.
By: S K Gupta, Advocate,
Supreme Court of India,
The special provision
i.e. paragraph 83 of the Employees’ Provident Fund Scheme,1952 ( in short the
‘Scheme,1952’) as well as paragraph 43A of the Employees’ Pension Scheme,1995 (
in short the ‘Pension Scheme,1995’) have been given effect from 1st
October’2008 for compliance of IWs. Subsequently, certain amendments have been
carried out vide notification dated 3rd September’2010. As many as five years have been lapsed to the
insertion of the riders in respect of IWs in the Scheme, 1952 and the Pension
Scheme, 1995 thereof, still many questions, queries and legal opinions are
being hunted by the establishments, particularly IT sectors, multinational companies,
Air-lines, International Sport Company and Hotels Industries etc. In fact, most
of these companies have been repeatedly raising queries in respect of salary limit,
meaning of full-salary, deduction of provident fund contribution, compliance of
IWs, certificate of coverage (COC), definition of IW and withdrawal of
provident fund on leaving the employment from India.
Since there was copious
illumination, sought from the industrial sectors, Multinational Companies , IT
sectors, Hotel Industries, Sport-industries etc to the legal expert as well as to
the local Regional Provident Fund Commissioner, Employees’ Provident Fund Organization
for making honest compliance of IWs so for smooth compliance in respect of IWs,
the Employees’ Provident Fund Organization, Delhi ( in short ‘EPFO’), has inducted
an Additional Central Provident Fund Commissioner ( IWs) at Delhi head quarter ,
who has been empowered to looking after the affairs of IWs across the country.
For illumination of queries, the Additional Central Provident Fund Commissioner
(IWs), EPFO, Delhi had issued various instructions and clarification through
circular to the Regional Provident Fund Commissioner(s), Assistant Provident
Fund Commissioner(s), employer(s) and employee(s). The latest circular no.
IWU/7(17)2009/2816 dated 25.05.2012 ( may ask the aforesaid circular by sending
email to:skpfdelhi@mail.com), issued by the Additional Central
Provident Fund Commissioner ( IWs) , Delhi, who has clarified various compliance
issues, involved in implementation of the Scheme,1952 as well as the Pension
Scheme,1995 in respect of IWs. Every communiqué, either verbally or through circular,
pleads for Provident Fund deduction on the full- salary (i.e. without any wage
ceiling) whereas the word ‘full-salary’ has not been defined under the Act,
1952 or under the paragraphs of the Scheme, 1952. In fact, only the word ‘basic
wages’ has been defined under Section 2(b) of the Act, 1952 which was further elaborately
clarified by the Apex Court in the matter of Bridge and Roofs
Co. Ltd Vs. Union of India, AIR 1963 SC 1474 and further followed by the
Apex court in the matter of Manipal Academy of Higher Education Vs.
Provident Fund Commissioner, 2008 LLR 443 SC.
COVERAGE: Who is IW?
An International
Worker (IW) may be an Indian worker or a foreign national as defined under
paragraph 2(ff) of the Scheme, 1952
International Worker (IW) means: -
Any 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 social security programme of that country, by virtue of the
eligibility gained or going to gain, under the said agreement;
- An employee other
than an Indian employee, holding other than an Indian Passport, working for an
establishment in India to which the Act, applies;
‘Excluded employee' in reference of IWs:
'Excluded employee' means an International Worker, who has been contributing to a social security programme of
his country of origin, either as a citizen or resident , with whom India has
entered into a social security agreement ( SSA) on reciprocal manner and has
been enjoying the status of detached-employee for the period and terms, as
specified in the SSA.
‘Detachment’ means:
A detached IW , who
has been contributing to the social security programme of the home-country and that
home-country has issued a detachment Certificate for a specified period in
terms of the bilateral SSA signed between host-country and India or an
International Worker, who has been contributing to a social security programme of
his country of origin, either as a citizen or resident, with whom India has
entered into a bilateral comprehensive economic agreement, containing a clause
on social security prior to 1st October,2008, which specifically exempts
natural persons of either country to contribute to the social security fund of
the host-country.
First example of ‘detached Employee’ #
A person, who is
covered under the legislation of home-country (i.e. Hungary) and employed in the home-country (i.e. Hungary), is sent
by the employer, to work on behalf of that employer in the other country (e.g.
India) will be governed by the regulation of the home-country (i.e. Hungary) irrespective of whether he is sent from Hungary or a third country.
For this purpose, a “Certificate of Coverage” (in short ‘COC’) or detachment
certificate is to be obtained from the home-country, which serves as a proof of
exemption from social security contributions in the host country i.e. India.
# meaning of ‘detached employee’ also depends upon
the terms and conditions of Social Security Agreement (SSA).
Second example of ‘detached-employee’
If any employee, who
avails exemption from contributing in the other country by obtaining a
certificate of coverage (COC) from India and contributes to the social security
system in India, will not fall under the category of IW and therefore , shall
be treated as ‘detached-employee’.
“Full–salary” or “Basic wages” for calculating PF
contributions under the Act, 1952:
The Provident
Fund Contribution shall be paid by the employer to the fund as per Section 6 of
the Act, 1952 read along with paragraph 36 of the Scheme, 1952. In fact, the
paragraph 36 of the Scheme, 1952 in respect of IWs was inserted, casting duty
to the ‘employer’ to send consolidated return, indicating distinctly the
nationality of each and every IWs, required or entitled to become members of
the fund showing the basic wages, retaining allowance, (if any)
and dearness allowance including the cash value of any food concession paid to
each of such international worker. The
PF contribution shall be calculated/
deducted as per definition of basic wages as defined under Section 2(b) read
along with section 6 of the Act, 1952 and paragraph 36 of the Scheme, 1952 in
respect of IWs. In fact, the definition of basic wages will be remained the same
for IWs as defined under Section 2(b) of the Act, 1952 read along with Section 6
of the Act, 1952 as well as the paragraph 36 of the Scheme, 1952.
Therefore, the components of basic wages in respect of IW to be included for
the purpose of deduction of PF contribution, are the same as in the case of
Indian employee’s basic wages as defined under Section 2(b) of the Act, 1952.
In fact, the word “Full-Salary” has not been defined under the Act, 1952 or under
the Scheme, 1952 so the deduction of PF contribution shall be done as per
Section 6 of the Act, 1952 on the component of basic wages, paid to the IW, not
on “full-salary”.
Clarification-I: In the Scheme, 1952, for Indian employee, there
is statutory limit of basic-wages i.e. Rs.6500.00 ( Now , Rs. 15,000.00 from
01.09.2014) but for an IW, there is no limit of basic wage i.e. total basic
wages shall be counted for deduction of PF Contribution for IWs. Prior to
issuance of the notification dated 11.09.2010, there was diversion of 8.33 from
employer’s share of PF contribution to the Employees’ Pension, 1995 i.e. Account
No.10, was restricted to basic wages up to Rs.6500/ only i.e. upto Rs.541.00. However,
consequent upon notification dated 11.09.2010, the pension fund @ of 8.33 shall
be calculated on total basis wages, not restricted to ceiling of Rs.6500.00 per
month and shall be remitted in account no.10 through ECR. Again , for
remittance of pension fund got changed from 01.09.2014 for new IWs and now ,
pension fund shall be remitted upto the statutory limit i.e. Rs.15,000.00 for
new IWs only.
Clarification-II: It is further
clarified that where basic wages are paid in a currency other than in the
Indian rupee, the rate of conversion of that currency shall be the telegraphic
transfer buying rate offered by the State Bank of India, established under the
State Bank of India Act 1955 (23 of 1995) for buying such currency on the last
working of the month for which the basic wage are due in respect of IWs. This
is the additional provision what this set of provisions mean for international
workers?
Social Security Agreements (SSA):
A Social
Security Agreement (SSA) is a bilateral instrument to protect the social
security interests of IWs posted in another country. Being a reciprocal
arrangement, it generally provides for avoidance of double coverage. In fact,
SSA is a legal document for IWs for all purpose provided it should not be
contrary to the Indian laws.
Important silent provisions of SSA:
Generally a Social Security Agreement (SSA) covers three provisions.
a)
Detachment: Applies to employees sent on posting in another country, provided they
are complying under the social security system of the home country as well as
the terms and conditions of SSA of the host country.
b)
Exportability of
Pension: Provision for payment of pension benefits
directly without any reduction to the beneficiary choosing to reside in the
territory of the home country as also to a beneficiary choosing to reside in
the territory of a third country.
c) Tantalization of Benefits: The
period of service rendered by an employee in a foreign country is counted for
determining the "eligibility" for benefits, but the quantum of
payment is restricted to the length of service, on pro-rata basis.
STATUS OF S S A (as on December’2013): (*)
Belgium 1st Sept.’2009
Germany 1st Oct.’ 2009
Switzerland 29th Jan.’2011
Denmark 1st May ‘2011
Luxembourg 1st June ‘2011
France 1st July ‘2011
Hungary
1st April’
2013
Netherlands 1st Dec.’2011
South Korea 1st Nov.’ 2011
Finalnd 16th
July’2014
(*) you may ask any SSA by
sending email to: skpfdelhi@gmail.com
COMPLIANCE OF IWs BY THE
ESTABLISHMENT:
All foreign nationals, employed in an
establishment, are to be enrolled as IWs ,with the exception of those who fall
under the category of ‘excluded employee’ on the basis of a ‘certificate of
coverage’ ( COC) issued by a competent authority under SSA with India. The paragraph 36 of the Scheme,1952 in respect of IWs was inserted ,
casting duty upon the ‘employer’ to send consolidated return in Form 05 (For un-exempted
establishment ) or Form 4 PS ( For exempted establishment ) along with with
Form 02, furnishing details of such qualifying IWs, indicating distinctly the
nationality of each and every IWs, required or entitled to become members of
the fund showing the basic wages, retaining allowance,(if any) and dearness
allowance including the cash value of any food concession, paid to each of such
IW. The prescribed form for IW-1 i.e. So
s called–Statement IW-1 (may ask the aforesaid statement IW-1 by sending email to:skpfdelhi@mail.com)
must
be submitted every month by the establishment, mentioning the details of IWs as
defined under paragraph 2(ff) (a) & 2(ff) (b) of the Scheme, 2008. If there is no
IW, qualifying to become a member of the fund for the first time or in case, if
there is no IW, the employer shall send a ‘NIL’ return to the local office of
the EPFO.
CERTIFICATE OF COVERAGE(COC):
A ‘certificate of
coverage’ ( COC) is issued in respect an employee, who is posted for a short
term assignment by his/her Indian employer to a country with whom India has a
SSA. For this purpose, the employee is required to submit an application in the
prescribed format through his employer to the local Regional Provident Fund Commissioner
who , in trun, after due verification of records, forwards it to the IWs unit
at Employees’ Provident Fund Organization, Delhi for issuing COC. Now , COC has
to applied through portal ( EPFO-web-site)
SETTLEMENT OF PF CLAIM IN RESPECT OF IWs. (*):
IWs may withdraw in
accordance with paragraph 83 of the Scheme, 1952, full amount standing to his
credit in the fund in following circumstances only:
(i)
On retirement after attaining the age of
58 years.
(ii)
On retirement on permanent disability
due to bodily or mental infirmity ( include TB , leprosy and cancer)
(iii)
On the ground as specified in the SSA,
entered into between the Government of India and any other country.
(iv)
Withdrawal benefits under the
Employees’ Pension Scheme, 1995 is
available to only those IWs who are covered under the provisions of the SSA
with India and not to other foreign IWs.
(*) All
withdrawal benefits /pension benefits shall be calculated subject to the SSA’s
terms and conditions of the host-country.
PF CONTRIBUTION UNDER EMPLPOYEES’ DEPOSITED-LINKED INSURANCE SCHEME,
1976 IN RESPECT OF IW:
The contribution (@ 0.5% of the insurance fund and
its administrative charges @ 0.01%) under the EDLI Scheme, 1976 shall be
remitted by the employer together with administrative charges upto the basic
wages Rs. 15000.00 , not on full basic wages of IW.
Post amendment in respect of IWs, the revised PF contribution
including pension fund will be as follows:
Contribution
|
International Worker who has joined
on or after
1 September 2014
|
International Worker who has joined
prior to 1 September 2014
|
Employee's contribution to Provident Fund
|
12% of the basic wages
|
12% of the basic wages
|
Employer's contribution to Provident Fund
|
12% of the basic wages
|
3.67%
the basic wages
|
Employer's contribution to Pension Scheme,1995
|
8.33%
the basic wages
|
|
Total
|
24% the basic wages
|
24% of the basic wages
|
Reference:
SK Gupta
25-B , Pocket-I, Mayur Vihar-III, Delhi-110096,
M-+91-9891170907,+91-9968097740,+91-11-22624124,
Email:skpfdelhi@gmail.com http://epfadvskgupta.com http://makeinindialawfirm.com
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