The International Worker and PF Compliance in India: The Para 83 Puzzle.

STATUTORY FRAMEWORK:

The Employees Provident Funds and Miscellaneous Provisions Act, 1952 [“the Act”] was enacted as a social welfare legislation1 with the aim of ensuring retirement funds for workers. It is a beneficial statute which ensures mandatory employer and employee contributions to the Provident Fund [“PF”] in establishments covered by the Act. Provident Funds under this Act are established by way of the Employee Provident Fund Scheme, 1952 [“the Scheme”].

In 2008, the Union Government inserted Para 83 in the Scheme to bring foreign nationals under its purview2. It created a new category being ‘International Worker’[“IW”] which includes (a) an Indian employee working in a foreign country with which Indian has entered into a social security agreement and (b) a foreign national employed at an establishment covered by the Act3. Unless the worker is ‘excluded’ by way of contributing to a social security programme in a country with which India has a social security agreement, they are required to become a member of the Provident Fund4.

By way of this amendment, IWs became a separate class from Domestic Workers [“DW”]. PF contribution is calculated on their full pay and contribution is mandatory for all IWs and their employers irrespective of the amount they earn5. On the other hand, contributions are only mandatory for DWs earning basic wage, dearness allowance and retaining allowance totalling not more than INR 15,000/-. The mandatory contribution amount is capped at 12% of this amount7. Even if an employee’s pay exceeds INR 15,000/-, the mandatory contribution is capped at INR 15,000/-6 unless special permission is provided to contribute a larger amount8. Further, IWs could only withdraw the PF amount upon retirement from service in that establishment or after attaining 58 years of age, whichever is later, or due to total medical incapacity.9

DIFFERING OPINIONS AMONG HIGH COURTS:

Challenges were filed to Para 83 in the High Courts of Karnataka and Delhi. The Petitioners in Stone Hill Education Foundation v. Union of India10 before the Ld. Single Judge in Karnataka argued that Para 83 failed the test of Article 14 of the Constitution of India as there is no intelligible differentia between a DW and an IW not covered by a social security agreement [“SSA”] nor is there any nexus between classification and the object sought to be achieved by the Act and Scheme. The Act itself was intended to provide for coverage of weaker sections and at no point was it intended to cover high earning positions and therefore this amendment to the Scheme, a subordinate legislation, had travelled beyond the parent Act. Further, it was argued that the Scheme was oppressive and suffered from manifest arbitrariness and non application of mind as IWs do not work in India till retirement. They only work for a limited period and thus, requiring them to pay PF contribution on their entire global salary would only cause irreparable injury. A challenge was also raised that the provision violates the right to practice one’s profession under Article 19(1)(g) of the Constitution.

Similarly, before a Division Bench of the High Court of Delhi, in Spice Jet Ltd. v. Union of India112 the Petitioners challenged the constitutional validity and interpretation of Paragraph 83 contending that the provision resulted in hostile discrimination between IWs and DWs, imposed excessive financial burden on the employers, and, specifically in the case of the Petitioner therein, failed to account for the nature of work by expats in the aviation sector which is often contractual and temporary. In both cases, the Union of India argued that the amendment kept in mind the interests of IWs and obligations arising out of bilateral agreements with foreign countries. The amendment intended to prevent avoidance of statutory contributions through foreign employment structures. Further, before the Delhi High Court, it was also argued that unlike Indian workers who work till the age of superannuation, IWs generally serve for a period of two to five years. The former may face economic duress if they are mandated to contribute to the Scheme throughout their long period of service.

Both High Courts took markedly different views. The earlier decision of the Karnataka Higher Court emphasized that:

1. The aims and objects of the Act are intended to provide retirement benefits for those in lower salary brackets and were not intended for employees drawing lakhs of rupees per month. The object of Para 83 itself was to protect Indians working abroad from being subject to the retirement clauses of foreign countries.
   

2. Para 83 being part of subordinate legislation cannot go beyond the parent Act by prescribing an unlimited threshold for IWs when the parent Act has a ceiling of INR 15,000/- per month while also denying that benefit to Indian workers.
   

3. There is no rational basis for this classification of lower wage DWs and high earning IWs. Nor is there basis for the classification between an IW of Indian origin and an IW of foreign origin.
   

4. The claim of reciprocity holds no water as an IW from a non-SSA country cannot withdraw their PF amount till they reach 58 years of age, even if they leave the country before that.

Based on the above, the Court struck down Para 83 as arbitrary and violative of Article 14 of the Constitution of India, and on the ground that the same went beyond the parameters of the parent Act.

The High Court of Delhi reached the opposite conclusion and expressly held that IWs constitute a distinct and well-defined class, separate from DWs on the basis of the economic duress or lack thereof faced by IWs as opposed to DWs. Taking note of the decision in Stone Hill the Court respectfully disagreed with the Ld. Single Judge therein on the ground that the economic duress argument had not been considered. Reliance was also placed on the decision of the High Court of Bombay in Sachin Vijay Desai v Union of India12, wherein the Petitioner had made a plea of discrimination against IWs as no ceiling limit was prescribed in their case. The High Court therein had also held that IWs form a separate class and that the purpose of such distinction was to make special provisions for Indians working abroad and foreign nationals working in India who would ordinarily do so for a short or limited period. Thus, the High Court of Delhi aligned with the reasoning in Sachin Vijay Desai and expressly upheld the constitutional validity of Para 83.

However, the above ruling fails to consider the practical and financial challenges faced by both employers and employees under this regime. Employers must contribute on the full salary without a wage cap. The funds thus contributed also remain inaccessible to employees from non-SSA countries till they reach the age of 58 or are medically incapacitated to the extent that they cannot continue to work. A final resolution on this question may be dealt by the Supreme Court.

COMPLIANCE IN THE CURRENT SCENARIO:

The Government of India also announced the implementation of four Labour Codes on 21 November 2025 which also includes the Code on Social Security, 2020 which subsumes the EPF Act, 1952. The Code itself does not alter or clarify the special provisions with regards to IWs but this position may change depending on whether a new scheme is framed under the Code. Meanwhile, it is important for establishments to whom the current Scheme is applicable to ensure that their compliance processes are in line with the Act and Scheme to lessen any risks that may arise due to non-compliance.

Citations

1. Regional Provident Fund Commissioner v. The Hooghly Mills Company Limited & Ors., (2012) 2 SCC 489

2. Employees’ Provident Funds (Third Amendment) Scheme, 2008 notified on 01 October 2008

3. Para 83(2), Employees’ Provident Funds Scheme, 1952

4. Para 83(3), Employees’ Provident Funds Scheme, 1952

5. Ibid

6. Para 2(f), Employees’ Provident Funds Scheme, 1952

7. Para 26, Employees’ Provident Funds Scheme, 1952

8. Para 26, Employees’ Provident Funds Scheme, 1952

9. Para 83(6), Employees’ Provident Funds Scheme, 1952

10. 2024 SCC OnLine Kar 49

11. 2025 SCC OnLine Del 8271

12. 2019 SCC OnLine SC 2356