Samarendra KumarRegional PF CommissionerEMPLOYEES’ PROVIDENT FUND ORGANISATIONsamganju@yahoo.comSocial Security Agreement/...
Obstacles in global mobility No exemption from social securitytax/contribution in the host countriesleading to double tax...
Obstacles in global mobility contd. Prospects of serious gaps in a worker’ssocial security record Extra IncomeTax liabil...
India’s response to the situation Recognition of a new category of workershaving skills and talents and outboundmobile ca...
Response continued As per it’s provisions: Every foreigner worker (unless excluded interms of an SSA) was required to be...
Benefits envisaged for Employees ofcountries covered under SSADetached workers of a contracting state wereexempted from m...
Outcomes An environment was created whichgenerated parity with social securitysystem of other countries which hadhitherto...
What is a Social SecurityAgreementorTotalisation Agreement An SSA coordinates the social security schemes oftwo or more c...
Totalisation Agreements contd SSA/TA does away with double social securitytaxation on the same earnings, fills up the gap...
Benefits under Indian SSA/TAThus major benefits under IndianSSA/TA are: Detachment Totalisation Portability10
DetachmentThe term ‘detached worker’, refers to an outbound mobileworker who is posted by his/her employer to work inanoth...
Detachment contd… As a corollary, the workers who are hiredlocally in a contracting country or sentthere for a long term ...
Totalisation of Benefits Totalisation protects the benefit rights ofworkers who divide their working careerbetween two or...
Totalisation of Benefits (1) Totalisation allows period of contributory servicerendered or social security credits earned...
Totalisation of Benefits (2) Totalisation may also allow a country todetermine benefit entitlement for aworker’s dependen...
Exportability of Pension (1) This provision in an Indian SSA orTotalisation Agreement also removesrestrictions that a cou...
Exportability of Pension (2) Benefits are payable directly without anyreduction to the beneficiary choosing to reside int...
International WorkerTo properly address these concerns theterm IW was coined to define a specificsection of Foreigner and ...
Who is an InternationalWorker ? InternationalWorker means:1. Any Indian worker, having worked or going to work ina foreig...
Indian I W20Indianworkingabroadin a SSAcountryPosted withCOC(Not required tocontribute abroad)DomesticworkerContribute to ...
Foreigner IW21Coming fromSSA countryWith COC- NO(Excluded employee)Without COC-YESComing fromNon SSAcountryYes, IW
Excluded EmployeeExcluded employee is a foreigner ‘detached worker’-I.posted in an establishment in India;II.contributing ...
Coverage and ComplianceWho will become member of the Fund? Every IW, other than an excluded employee - from 1stOctober, 2...
Benefits under Indian SS legislationFor foreigner IW covered under an SSA1. withdrawal of PF accumulation on ceasing to be...
Certificate of Coverage (COC) Country-specific application form (available onofficial website) filled by employee and emp...
How has SSA/TA worked so far?
Benefits under SSAsCountry Detachment Totalisation PortabilityBelgium 5 years √ √Germany 4 years ⤫ ⤫Switzerland 6 years ⤫ ...
Implications on mobility1. The cost of totalization as a result ofadditional benefit payments based oncombined credits and...
Implications contd.Sl. No. CountryDetatchedW(I)ExcludedW(F)ForignIWIndianIW1. Belgium5104 338 - -2. Germany8307 1239 - -3....
Implications contd.Sl.No.CountryDtchWExclWForgn IWIndIW5. Lxmbrg62 253 - -6. France697 16 - -7. Sthkorea177 801 - -30
Implications contd.Sl. No. CountryDetatchedWExcluded WForignIWIndianIW8. Netherlands1565 182 - -Total 17671 3228 4251 847131
Implications contd. 17,671 COCs issued for Indian workers postedin another countries for short term. Thesecontinue to com...
Implications contd. Thus it appears that the SSA/TA arefacilitating outward mobility of youngIndian talented workers spec...
 Is the utopian ideal ofVasudhaivaKutumbakam or universal transborderbrotherhood achievable after all!34
THANKS
of 35

NASSCOM Global Mobility Conference 2013 - Social Security Agreement/Totalisation Agreement and Mobility

Published on: Mar 3, 2016
Published in: Technology      Business      
Source: www.slideshare.net


Transcripts - NASSCOM Global Mobility Conference 2013 - Social Security Agreement/Totalisation Agreement and Mobility

  • 1. Samarendra KumarRegional PF CommissionerEMPLOYEES’ PROVIDENT FUND ORGANISATIONsamganju@yahoo.comSocial Security Agreement/TotalisationAgreementandMobility
  • 2. Obstacles in global mobility No exemption from social securitytax/contribution in the host countriesleading to double taxation on the sameearnings (both ITax &SSTax) No return of contribution No benefit for short span of contributoryperiod No exportability of benefits2
  • 3. Obstacles in global mobility contd. Prospects of serious gaps in a worker’ssocial security record Extra IncomeTax liability for ERs in r/oreimbursements (of addl I.Tax , SSTax &EmploymentTax etc) to outbound mobileEE/worker which generally were declaredtaxable income by the host country These were disincentives for ERs toassign workers where they were neededmost and for workers to accept suchassignments 3
  • 4. India’s response to the situation Recognition of a new category of workershaving skills and talents and outboundmobile called ‘InternationalWorker’ (IW) Special Provisions relating to IWs wereintroduced from 1.10. 2008 andincorporated in the EPF Scheme as Para83 and in EPS as Para 43-A4
  • 5. Response continued As per it’s provisions: Every foreigner worker (unless excluded interms of an SSA) was required to be enrolledunder EPF Scheme from 1st October, 2008 Contribution on full wages without anyceiling Withdrawal of Provident Fund onattaining the age of 58 years No “withdrawal benefit” permitted underEPS,1995 for persons not covered underany SSA5
  • 6. Benefits envisaged for Employees ofcountries covered under SSADetached workers of a contracting state wereexempted from making mandatory contributionin IndiaFinal withdrawal was made available to the IWson ceasing to be employed in an establishmentcovered under the ActReturn of contribution (i.e. withdrawal benefit)under EPS, 1995 was also made availableIWs were made entitled to “Totalisation” and“Portability” in terms of agreement6
  • 7. Outcomes An environment was created whichgenerated parity with social securitysystem of other countries which hadhitherto routinely and one sidedly taxedIndian workers. Pari pasu incentives for workers ofcountries having SSA/TA were laid down This set the stage where bilateral SSA/TAcould be negotiated on an equitable andreciprocal basis.7
  • 8. What is a Social SecurityAgreementorTotalisation Agreement An SSA coordinates the social security schemes oftwo or more countries in order to overcome thesocial security related barriers on global mobilityand facilitate extension of benefits under thesystems of any of the contracting countries in whicha person has worked, SSA/TA allows for more equitable treatment ofworkers and employers on a reciprocal basis.8
  • 9. Totalisation Agreements contd SSA/TA does away with double social securitytaxation on the same earnings, fills up the gapsin an EE’s social security record and removeslegal hurdles that prevent a worker who hasearned benefits in one country from receivingthem in the other country. It also indirectly relieves ERs from liability topay host country additional I Tax in r/o workersposted there on short term temporaryassignments.9
  • 10. Benefits under Indian SSA/TAThus major benefits under IndianSSA/TA are: Detachment Totalisation Portability10
  • 11. DetachmentThe term ‘detached worker’, refers to an outbound mobileworker who is posted by his/her employer to work inanother country for a limited, temporary and short period oftime for the same company or for an affiliate company andcontributes to his/her home countryworker sent on posting/secondment to another country isexempted from social security contributions in that countryProvided he/she is complying under the social securitysystem of the home countryPeriod of detachment is stipulated in a specific SocialSecurity Agreement.
  • 12. Detachment contd… As a corollary, the workers who are hiredlocally in a contracting country or sentthere for a long term or permanentassignment are covered under the socialsecurity legislation of the host country. Such workers pay ss tax/ ss contributionsin the SS system of the host country only. Thus, detachment under an Indian SSAhelps ER and worker in avoiding double sstaxation
  • 13. Totalisation of Benefits Totalisation protects the benefit rights ofworkers who divide their working careerbetween two or more countries. Such workers may fail to qualify for socialsecurity benefits of one or both countriesbecause they may not have worked longenough or contributed long enough tomeet eligibility requirements.
  • 14. Totalisation of Benefits (1) Totalisation allows period of contributory servicerendered or social security credits earned inanother country to be counted for determiningeligibility for pension/ss benefit for a personnot otherwise eligible However, calculation of benefit is restricted tocontributory period of service or credits earnedunder the respective social security legislation,on pro-rata basis.
  • 15. Totalisation of Benefits (2) Totalisation may also allow a country todetermine benefit entitlement for aworker’s dependents and survivors basedon workers combined coverage Totalisation is a dominant aspect of anySSA so much so that it is also calledTotalisation Agreement.
  • 16. Exportability of Pension (1) This provision in an Indian SSA orTotalisation Agreement also removesrestrictions that a country generallyimposes on benefit payment to workersand their survivors when they reside inthe other country. This is referred to as exportability orsimply, portability of pension
  • 17. Exportability of Pension (2) Benefits are payable directly without anyreduction to the beneficiary choosing to reside inthe home country. Benefits are also payable directly to thebeneficiary choosing to reside in a third country.
  • 18. International WorkerTo properly address these concerns theterm IW was coined to define a specificsection of Foreigner and Indian outwardmobile workers
  • 19. Who is an InternationalWorker ? InternationalWorker means:1. Any Indian worker, having worked or going to work ina foreign country with which India has entered into asocial security agreement ; and being eligible to avail thebenefits under social security programme of thatcountry by virtue of the eligibility gained or going to begained, under the said agreement. (ie, an Indianoutbound mobile worker who is not declared“Detached Worker”)2. A worker, other than an Indian worker, holding otherthan an Indian Passport, working for an establishment inIndia to which the EPF & MP Act, 1952 applies and whohas not been declared as an “Excluded Employee” .19
  • 20. Indian I W20Indianworkingabroadin a SSAcountryPosted withCOC(Not required tocontribute abroad)DomesticworkerContribute to socialsecurity system ofSSA countryInternationalWorkerContribution inIndia on return
  • 21. Foreigner IW21Coming fromSSA countryWith COC- NO(Excluded employee)Without COC-YESComing fromNon SSAcountryYes, IW
  • 22. Excluded EmployeeExcluded employee is a foreigner ‘detached worker’-I.posted in an establishment in India;II.contributing to the social security programme of thehome country; andIII.exempted from the provisions of the Indian socialsecurity in terms of a Social Security Agreement or abilateral agreement (e.g. CECA) signed with India prior to1-10-2008 (eg Singapore)Certificate of Coverage (COC) issued by the competentagency is necessary for deciding the status2222
  • 23. Coverage and ComplianceWho will become member of the Fund? Every IW, other than an excluded employee - from 1stOctober, 2008 Every excluded employee - from the date he ceases to beexcluded employeeContribution –Employees’ Provident Fund -on full wages without any ceilingEmployees’ Pension Fund – on full wages from 11.09.201023
  • 24. Benefits under Indian SS legislationFor foreigner IW covered under an SSA1. withdrawal of PF accumulation on ceasing to beemployed in an establishment covered under the Act2. “withdrawal benefit” under EPS, 1995 available3. Totalisation and Exportability of pensionary benefitsunder EPS’95 availableFor foreigner worker NOT covered underan SSA1. withdrawal of PF accumulation not before the age of58 yrs or on account of permanent and totalincapacity due to bodily and/or mental infirmity2. No “withdrawal benefit” under EPS, 199524
  • 25. Certificate of Coverage (COC) Country-specific application form (available onofficial website) filled by employee and employer,to be submitted to the EPFO office concerned RPFC concerned to certify and forward applicationto EPFO Head Office COC issued by Head Office are forwarded to RPFCfor onward transmission to employer No. of COC issued 17671 (as on 30-4-2013). Highest no. of COC are for Germany and Belgium25
  • 26. How has SSA/TA worked so far?
  • 27. Benefits under SSAsCountry Detachment Totalisation PortabilityBelgium 5 years √ √Germany 4 years ⤫ ⤫Switzerland 6 years ⤫ √Denmark 5 years (for Indians)3 years (for Danish)√ √Luxembourg 5 years √ √France 5 years √ √South Korea 5 years √ √Netherlands 5 years ⤫ √27
  • 28. Implications on mobility1. The cost of totalization as a result ofadditional benefit payments based oncombined credits and the elimination ofbenefit payment restrictions for peopleresiding in other countries as also because ofelimination of dual social security taxes needsto be worked out. Generally it is presumed that SSA/TA is morefavourable to the countries like India whichexports manpower. Because of savings on double taxation, bothIncome Tax and social security tax,employers are encouraged to go global.28
  • 29. Implications contd.Sl. No. CountryDetatchedW(I)ExcludedW(F)ForignIWIndianIW1. Belgium5104 338 - -2. Germany8307 1239 - -3. Switzerland1468 276 - -4. Denmark290 123 - -29
  • 30. Implications contd.Sl.No.CountryDtchWExclWForgn IWIndIW5. Lxmbrg62 253 - -6. France697 16 - -7. Sthkorea177 801 - -30
  • 31. Implications contd.Sl. No. CountryDetatchedWExcluded WForignIWIndianIW8. Netherlands1565 182 - -Total 17671 3228 4251 847131
  • 32. Implications contd. 17,671 COCs issued for Indian workers postedin another countries for short term. Thesecontinue to comply under Indian SS system(Detached workers) 3,228 foreigner workers working in India onCOCs issued from their country. Thus,contributing to a SS system of their homecountries (Excluded Employees) 8,471 Indian IW in foreign countries with whichIndia has entered into a SSA/TA and are eligibleto avail the benefits under ss system/legislationof that country (Indian IWs) 1,023 foreigner IWs, holding non-IndianPassports, are working for an Indianestablishment to which the EPF&MP Act orother Indian ss legislations applies. However,they belong to countries not having SSA/TA32
  • 33. Implications contd. Thus it appears that the SSA/TA arefacilitating outward mobility of youngIndian talented workers specially towestern countries. Outward mobility of Indians are in bulk tocountries where existing pool of labour isinsufficient in quality or/and quantity Chances are that in these countries shortterm assignments will be renewed andultimately result in localisation andmigration of Indian I.Ws.33
  • 34.  Is the utopian ideal ofVasudhaivaKutumbakam or universal transborderbrotherhood achievable after all!34
  • 35. THANKS

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