Are EPF contributions still mandatory for international employees after Karnataka High Court ruling?

The Karnataka High Court's ruling on April 25, 2024, deemed the specific provisions regarding 'International Workers' within the Indian Employees Provident Fund legislation as unconstitutional and arbitrary. Initially introduced by the Central Government on October 1, 2008, these provisions were outlined in Paragraph 83 of the Employees' Provident Funds Scheme, 1952 ('EPF Scheme'), and Paragraph 43A of the Employees' Pension Scheme, 1995 ('EPS').

According to the EPF Scheme, an international worker is characterized as an individual possessing a foreign passport who is employed by an Indian employer subject to the EPF Scheme.] 

1. It is obligatory for individuals to be enrolled as members under the EPF Scheme, regardless of their basic salary level, unless they fall under the purview of a Social Security Agreement or Bilateral Comprehensive Economic Agreement between India and the worker's home country. India has established Social Security Agreements with 20 nations, such as Belgium, Germany, Australia, Canada, Japan, among others, as well as a Bilateral Comprehensive Economic Agreement with Singapore.

2. Contributions to the Provident Fund are mandated at a rate of 12% of the basic salary and various allowances (such as conveyance allowance, host country allowance, hardship allowance, etc.), with no limit on the contributions from either the employer or the employee. Consequently, if an international worker enrolls in the EPF scheme with a basic salary of Rs 500,000, they must join the scheme, and contributions to the EPF account will be based on the actual salary without any constraints.

Read more at The Economic Times