Firms paying low PF to international workers under EPFO's scanner

deccan chronicle

Business, Companies

International workers are Indian employees working in foreign countries or those with foreign passports, working for Indian firms.

EPFO is taking stern measures against companies making lower provident fund contributions for international workers.

Mumbai: In an effort to coax the US and UK to accept the social security agreement, the Employees Provident Fund Organisation (EPFO) is taking stern measures against companies making lower provident fund (PF) contributions for international workers by showing lower basic salary.

The EPF Act was amended to include international workers in 2008. While for Indian citizens there is a cap on the PF contribution at 12 per cent of Rs 18,000 a month, there exists no such cap for international workers. According to media reports, EPFO is cracking down on these companies as they are lowering the basic pay and paying out larger amounts under other heads. This enables them to make lesser PF contributions as the total basic salary becomes lesser.

International workers include Indian employees having worked or going to work in foreign countries or employees other than Indian employees, holding other than an Indian passport, working for an establishment in India to which the EPF Act applies.

EPFO is urging companies to pay PF on the whole of the salary of an international worker, including OCIs or Oversees Citizens of India.

Several experts believe that this anomaly has occurred due to several grey areas in the law. International workers include people of Indian origin who may hold foreign passports but have lived in India all their lives. Since Indian companies generally do not require employment visas, it gets difficult to identify international workers which often leads to such problems.

The other vital issue that needs to be addressed to ensure international workers get their rightful PF due is that of whether PF contribution will be made on their basic salary or on total salary. This matter is being heard by the Supreme Court according to media reports.

Some experts however believe EPFO’s crackdown comes as a part of its ploy to get the US and UK to sign the totalisation or social security agreement. Under SSA, Indian employees going to work in a foreign country will not need to comply with their social security schemes and employees from such countries will not need to comply with the Indian PF scheme.

In the absence of the US and UK’s acceptance of the same, Indians working there end up forfeiting the contributions collected under their social welfare schemes when they return to India in less than 10 years.  According to the estimates of IT body Nasscom , Indian IT firms and workers forfeit around USD 1 billion to 2 billion every year. Experts are of the view that the US has taken the matter lightly as not too many Americans work in India.