In a significant judgment with wide-ranging implications for multinational companies and foreign professionals, the Delhi High Court has upheld the mandatory inclusion of international workers under the Employees’ Provident Fund (EPF) scheme in India.
The ruling, delivered by a bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela, validates two central government notifications issued in 2008 and 2010 that extended EPF coverage to foreign nationals employed in India.
EPF for Foreign Workers in India: Background of the Case
The case was brought before the court by SpiceJet and LG Electronics India, which challenged the legality of the government’s move to mandate EPF contributions from international workers.
The petitioners argued that the rules were discriminatory, as they required foreign employees to contribute to the EPF regardless of their salary, while Indian employees were only mandated to contribute if their monthly earnings exceeded ₹15,000.
The companies contended that this distinction violated the principle of equality and placed an undue financial burden on foreign employees and their employers.
Court’s Rationale and Verdict
The Delhi High Court dismissed the petitions, stating that the central government has the legislative competence to extend the EPF scheme to international workers under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
The court held that the notifications were constitutionally valid and did not suffer from any legal infirmity.
The bench clarified that the differentiation between Indian and foreign workers was based on intelligible differentia and had a rational nexus with the objective of ensuring social security for all workers employed in India.
The court emphasized that foreign employees working in India must contribute to the EPF, regardless of their salary level, and that this requirement was consistent with the broader goals of the EPF Act.
Implications for Employers and Foreign Workers
The ruling has immediate implications for multinational corporations, foreign embassies, and international NGOs operating in India.
Employers must now deduct EPF contributions from the salaries of all foreign employees, even if their earnings fall below the ₹15,000 threshold.
Legal experts note that this could lead to increased compliance costs for companies and may affect the take-home pay of expatriate workers.
Additionally, foreign employees will only be able to withdraw their full EPF balance upon retirement at age 58 or in cases of permanent disability, unless a social security agreement (SSA) exists between India and their home country.
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