The Supreme Court of India has agreed to look into whether foreign employees working in India must contribute to the Employees’ Provident Fund (EPF) under the 1952 scheme. This comes after LG Electronics challenged the rules that require “international workers” to make provident fund (PF) contributions. A bench of
Justices PS Narasimha and Alok Aradhe have issued notice to the Central government and asked the Employees’ Provident Fund Organisation (EPFO) to provide details of India’s social-security treaties with other countries.
The dispute centres on Paragraph 83 of the EPF Scheme, introduced in 2008 and 2010, which sets special rules for foreign nationals working in India. These rules were linked to India’s Social Security Agreements (SSAs) with other countries, designed to avoid duplicate payments and allow portability of benefits.
Under the current law, foreign employees in India must contribute to EPF unless they are covered by an SSA with their home country. If no SSA exists, they must contribute regardless of salary, unlike Indian employees who are covered only up to a wage ceiling. Employers argue this is unfair, especially for short-term foreign staff, and that funds cannot be withdrawn until retirement.
Last year, the Delhi High Court upheld the rules, saying the government had the authority to apply EPF to foreign nationals. LG Electronics has now appealed, pointing out conflicting High Court rulings. However, EPFO has warned that striking down Paragraph 83 could affect India’s international agreements and even breach treaty obligations. The Supreme Court has paused final orders in ongoing EPF liability proceedings until it decides the matter. This case could have major implications for expatriates, employers, and India’s global social-security commitments.
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A “detached” International Worker (IW) who is contributing to the social security programme of the home country and is certified by a valid Certificate of Coverage (COC) issued by that country, for a specified period under a bilateral Social Security Agreement (SSA) between that country and India, is treated as an “excluded employee”.
Because they are an excluded employee, they are not required to become a member of the Employees’ Provident Fund in India for that certified period.
If they do not have a COC under an SSA (even if they pay in the home country), they are treated as IWs and must contribute to EPF on full salary without wage ceiling.