• UGI USER
  • May 12, 2024
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“ANALYZING THE KARNATAKA HIGH COURT RULING ON EPF BENEFITS FOR FOREIGN WORKERS”

Syllabus:

  • GS-3 :Insurance and labor welfare , Human development and impact

Focus :

  • The article focuses on the recent Karnataka High Court ruling invalidating the amendment permitting foreign workers’ inclusion in the Employees’ Provident Fund (EPF) scheme.
  • It delves into the implications of the ruling on EPF benefits for international workers, the significance of Social Security Agreements (SSAs), the response from EPFO, and potential policy adjustments to ensure equitable treatment of foreign workers
Source - TH

Introduction:

  • The Karnataka High Court recently struck down a 15-year-old amendment to the law allowing incorporation of foreign workers in the Employees’ Provident Fund (EPF).
  • The ruling deemed the special provisions for international workers under EPF Scheme and EP Scheme as “unconstitutional and arbitrary”.

EPF Benefits for Foreign Workers:

  • The EPF Act of 1952 regulates EPF Scheme, EP Scheme, and Employees’ Deposit-Linked Insurance Scheme.
  • International workers were brought under the statute in 2008, mandating PF contributions, including 12% of the employee’s salary.
  • Unlike domestic counterparts, there was no wage ceiling for international workers.
  • Withdrawal of PF accumulations was permitted upon retirement, permanent incapacity, or as per Social Security Agreements (SSAs).

Social Security Agreements (SSAs):

  • SSAs are bilateral instruments aimed at avoiding double coverage under domestic and host country’s social security laws.
  • SSAs protect the social security interests of workers posted in foreign countries.
  • Indian employees under SSAs continue making social security contributions in India, avoiding double coverage.
  • India has SSAs with 21 countries to ensure uninterrupted social security coverage during international employment.
  • SSAs are crucial for promoting international mobility and leveraging demographic dividends.
  • SSAs ensure that employees under international employment are not disadvantaged due to double coverage issues.

Ruling Analysis:

  • The primary aim of the EPF Act was to offer retirement benefits to industrial workers.
  • The court emphasized that the law wasn’t designed to universally extend PF benefits regardless of the salary drawn.
  • Justice K.S. Hemalekha highlighted the disparity between Indian and foreign workers under SSAs, deeming it unconstitutional.
  • The ruling found the classification of foreign employees from non-SSA countries as different from Indian employees unjustified.
  • The government’s contention of special benefits due to international obligations was dismissed by the court.

EPFO’s Response:

  • The Ministry of Labour and Employment, through EPFO, is evaluating the future course of action.
  • EPFO is preparing an appeal based on specific provisions in the scheme to protect Indian workers abroad.
  • EPFO is consulting representatives of employers and employees to address apprehensions.
  • SSAs with 21 countries ensure uninterrupted social security coverage during international employment.
  • SSAs are essential for promoting international mobility and leveraging the demographic dividend.
About EPFO :

  • An act of the Indian Parliament established the Employees’ Provident Fund Organization (EPFO) to offer social security to laborers employed in India.
  • The Employee Provident Fund and Miscellaneous Provision Act of 1952 brought it into compliance.
  • The Indian government’s Ministry of Labor and Employment is in charge of EPFO.

EPFO UAN(Universal Account Number):

  • It is a 12-digit number that is given to each worker in a company.
  • A person’s many member IDs from different organizations will all be combined under a single UAN number that they will always have. Even if an employee leaves the company, this figure won’t alter.

Code on Social Security , 2020:

The Code on Social Security, 2020, introduced several significant provisions aimed at enhancing social security coverage and benefits for workers. Some of the major provisions include:

1.   Universalization of Social Security: The code aims to extend social security coverage to all workers, including gig workers and platform workers, thus ensuring a broader safety net.

2.   National Social Security Board: It establishes a National Social Security Board to recommend and oversee the implementation of social security schemes for various categories of workers.

3.   Portability of Benefits: The code allows for the portability of social security benefits, enabling workers to access benefits across different regions and sectors seamlessly.

4.   Establishment of Social Security Funds: It provides for the establishment of various funds, including the Building and Other Construction Workers Welfare Fund, to finance and administer social security schemes.

5.   Coverage of Unorganized Workers: The code extends coverage to unorganized workers, including agricultural workers, through appropriate schemes and measures.

6.   Provision for Maternity Benefits: It mandates maternity benefits for women workers, ensuring financial support during pregnancy and childbirth.

7.   Gratuity and Provident Fund: The code provides for gratuity and provident fund benefits, ensuring long-term financial security for workers upon retirement or resignation.

8.   Enhanced Coverage for Gig and Platform Workers: The code includes provisions specifically addressing the social security needs of gig and platform workers, acknowledging their unique employment arrangements.

Implications:

  • The ruling may have persuasive value outside Karnataka but may still be enforced in other states until further decisions.
  • Employers might need to continue provident fund compliances for international workers in certain regions.
  • India should consider amendments to ensure expats are treated equally with domestic workers regarding PF benefits.
  • The ruling could impact India’s existing SSAs with other countries, necessitating potential amendments.
  • The Supreme Court’s decision on the Karnataka High Court judgment will influence future legal and legislative actions.

Source:The Hindu

Mains Practice Question :

GS-3

 “Discuss the implications of the recent Karnataka High Court ruling striking down the amendment allowing foreign workers to be incorporated into the Employees’ Provident Fund (EPF) scheme. Evaluate the potential effects on India’s social security agreements with other countries and suggest policy measures to address the concerns raised by the ruling?” (250 words)