The Karnataka High Court (HC) recently made a significant decision that may lead to new employee provident fund and pension rules for international workers (IWs) in India.

The Karnataka High Court struck down the provisions of including international workers within the ambit of employees’ provident fund and pension schemes. The court said that including international workers in employee provident fund and pension schemes is unconstitutional and arbitrary, and against the purpose of the Employees’ Provident Fund and Miscellaneous Provisions Act, of 1952.

This decision can have major implications for international workers in India. The ruling was based on 23 petitions submitted before the Karnataka High Court. Similar issues may be ongoing in other high courts. The government is expected to appeal against the decision before the Supreme Court.

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EPFO is considering its options and suggesting separate legislation for IWs. The difficulty arises because India wants to attract global talent but also faces challenges in aligning various regulations.

“While holding the highest regard for the Court’s decision, the EPFO (Employees’ Provident Fund Organisation) is actively evaluating the course of action in response to this judgment,” the EPFO stated in answer to the Court’s questions.

The court highlighted several key points in its decision and they are as follows:

Constitutional grounds

In its ruling, the high court addressed the requirement for international workers to contribute to the EPF based on their entire global salary unless they have a certificate of coverage from their home country, if it had a social security agreement (SSA) with India. 

The court found that this provision violated Article 14 of the Indian Constitution, which guarantees equality before the law.

The provision was found to be discriminatory because they required international workers to contribute differently than domestic workers.

Also Read: EPF auto transfer rule: Got a new job? Check eligibility for automatic transfer of EPF account

Intent of Provident Fund Act

The judgment emphasized that the Provident Fund Act’s primary goal is to provide retirement benefits to employees in lower income brackets.

Extending these benefits to international workers, who often earn higher wages, was deemed contrary to the spirit of the law.

Threshold Disparity

The court emphasized the disparity in coverage for international and domestic workers. Local employees earning more than Rs 15,000 per month are not required to make contributions to the EPF.

However, international workers are required to contribute without such limitations.

Global Salary Contribution

According to the high court’s judgment, requiring contributions based on an international worker’s entire global salary is arbitrary and unjustified.

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