With the rising prominence of India in the global set-up, inward and outward movement of employees (expatriates) has become widespread. A continuing and an added concern in cross-border movements, however, is the double impact of employee?s social security costs and compliance with relevant regulations in both the home and host country.

To overcome this situation, Social Security Agreements (SSA) are signed between countries, which generally provide for avoidance of double coverage of social security contributions in two countries and equality of treatment with the host country employees.

Social security system in India for expatriates

As a result of the amendments in the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (PF Act), since October 2008, compliance and contribution under the Indian PF Act, has been made mandatory with respect to international workers (IWs) who do not qualify as excluded employees (EE). IWs include foreign nationals working for an employer in India to whom the PF Act applies and Indian employees working abroad in countries with which India has signed an SSA. Excluded employees (EE) include IWs who come from countries with which India has signed SSA and who are contributing under their home country social security regime.

Pursuant to the change brought in 2008, the specific provisions for withdrawal of contributions made under the PF Act for an IW have also been introduced. Broadly for IWs, withdrawal of PF is permissible only on retirement from services after attaining 58 years of age. However, if the IW is from a country with which India has an SSA, withdrawal is governed by the SSA provisions.

India?s SSA with certain countries

Till date, India has effective SSAs with Belgium, Germany, Switzerland, Denmark, Luxembourg, France, Republic of Korea and the Netherlands. The benefits under these SSAs are available from the respective dates from which they are effected. India has also signed SSAs with Hungary, Norway and Czech Republic. However, no benefit can be claimed under these SSAs as they are not yet effective.

Key benefits under SSA

Broadly, the benefits are three-fold.

Detachment benefit: The SSA would generally provide for avoidance of double social security coverage if the duration of the assignment in the host country is for a period as specified in the SSA. For example, under the SSA with Korea, detachment is available for a short-term contract up to five years.

In such a case, the employee may be entitled to claim exemption from contributing to social security in the host country, subject to prescribed conditions and obtaining a certificate of coverage (COC) from the home country.

In case of an IW coming to India, the Indian employer is required to file the same with the Indian PF authorities.

Similarly, in the case of an Indian employee going overseas, the employer should apply to the PF authorities in India to obtain a COC, by submitting the prescribed documentation.

Export of benefit: The SSA may provide a possibility of exporting the benefit from one country to the another, where the employee chooses the country of final residence.

Totalisation of benefits: The SSA may provide that the period of service rendered by an employee in a host country should be counted for determining the ?eligibility? for benefits; however, the quantum of payment is restricted to the respective length of service in each of the jurisdictions, on pro-rata basis.

It may also be noted that applicability and scope of each SSA may vary. For example, the SSA with Germany extends to persons who are ordinarily resident or employed in either country. The relevant terms of each SSA will need to be examined to ascertain the applicability and the coverage of the employees.

SSAs are based on principle of reciprocity by aiming to provide a level playing field for the Indians going to the host country vis-?-vis foreign nationals coming to India for work/ employment. However, the prescribed conditions under each SSA should be considered independently, before availing the underlying benefits.

The writer is partner, KPMG