International workers in India will have to contribute PF

New Delhi, September 7: India has decided to exert pressure on countries that are reluctant to negotiate bilateral social security pacts for workers’ pension, by making it compulsory for expatriate workers to pay pension contribution here.

A notification will be issued within days, which will make all ‘international workers’ in the country pay monthly contribution from their salary towards pension contributions into India's social security system.

Accordingly, 'international' workers in India, which includes Indian passport holders working abroad who return to India for an employment stint and then head back overseas, would be required to park 24% of their salaries into the three social security schemes run by the Employees' Provident Fund Organisation (EPFO).

Organised sector workers, numbering about 40 million, are compulsorily covered under the EPFO for up to a monthly salary of Rs 6,500, while foreign workers in the country remit their retirement savings into their home country pension systems. But once the notification is issued by the fund, they too would be required to contribute to the EPFO.

"We are notifying a change in the provisions under the EPF Act of 1952 to introduce a clause for 'international workers.' Currently, expatriates have no compulsion to contribute to the EPF and usually continue to pay into their home country's social security system so that their pension account doesn't show a 'break in service'. Now, they will have to contribute to the EPF and will get the same treatment on withdrawals as Indian workers in their country," said a senior Government official involved in the exercise.

However, unlike many countries, EPFO allows premature withdrawal, which means international workers can pull out their money when leaving India. Indian workers working abroad aren't allowed the same facility. They have to complete at least 10 years of service to be eligible for a withdrawal.

The rules governing the Employees' Pension Scheme 1995 are also being changed to ensure that foreign workers from countries that haven't signed bilateral pacts with India will not be allowed to withdraw their accumulated retirement savings, unless they complete the eligible service period or 58 years of age.

For several years now, India has been pursuing bilateral pacts with most major economies to ensure that Indian workers can totalise their retirement fund contributions in that country when they return home. For instance, 80,000-odd 'detached workers' from India working on consultancy and onsite assignments in the United States of America contribute over $1.5 billion to the US Social Security Fund annually. These are mandatory pension contributions at the rate of 15% of their basic salary.

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