Bilateral economic agreement with social security clause to facilitate India PF exemption

Background
Foreign nationals, working with an establishment in India to which the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act applies, are considered as International Workers (IWs) and need to contribute to PF. However IWs from countries with which India has an effective social security agreement [SSA] were considered excluded workers and exempt from PF contributions where specified conditions were met. The Government of India has entered into bilateral economic agreements (to strengthen trade, services and investment) which exempted natural persons from contributing to social security in the host country. However, no corresponding exemption was available in the PF regulations and hence foreign nationals from such countries were unable to leverage on the benefits provided for under such agreements.
The Ministry of Labour and Employment has recently issued a notification expanding the definition of excluded workers to extend the benefit to individuals covered by the bilateral economic agreements.
Highlights of the notification
As per the notification, an IW will be considered as an excluded employee and will not have to contribute to India PF where all of the following conditions are satisifed.
 The individual contributes to the social security programme of his country of origin as a citizen or a resident.
 India has entered into a bilateral comprehensive economic agreement with such country.
 The agreement was entered into prior to 1 October, 2008;
 The bilateral agreement has a clause on social security which specifically exempts natural persons of either country from contributing to the social security fund of the host country.
Comments
Expanding the definition of “excluded workers” to cover employees from countries with whom India has signed bilateral comprehensive economic agreement could provide substantial relief to inbound foreign nationals. The terms of the social security clause in the qualifying economic agreements and applicability to mobile employees need to be studied on a case by case basis before availing exemption. For instance, India has entered into a Comprehensive Economic Cooperation Agreement (CECA) with Singapore in 2005. Based on this, inbounds from Singapore may be entitled to be considered as excluded workers where specified conditions are met. However, the notification clearly provides for an effective date of 24 May, 2012. Accordingly, foreign nationals may have to contribute to PF upto 23 May, 2012 even if they are covered under the CECA. Detailed guidelines/ FAQs however are awaited from EPFO on this.
Source : Notification F. No. S-35025/09/2011/Ss-II dated 24 May, 2012 of the Ministry of Labour and Employment.