Inclusion of foreign worker in PF is “unconstitutional” says High Court

The Karnataka High Court not long ago ordered a verdict stating that the incorporation of the foreign workers under the Employee’s Provident Fund Organization (EPFO) scheme saying it was “unconstitutional and arbitrary”. Since the EPFO is a retirement savings program run by the Government of India, it requires employers to make mandatory contributions on behalf of their employees. A portion of the employee’s salary is also deducted each month and deposited into their employee provident fund account under this scheme, which is withdrawn later when the individual is retired or for any other approved purpose. This scheme was only available to workers who were citizens of India, but the government is also trying to expand it more by including workers who work in India although they are not citizen of India.

This move will act as a great challenge for the government and the Employee’s Provident Fund Organisation (EPFO). It will also impact those who have contributed to the Social Security Scheme or are part of it. The High Court decided that forcing foreign workers to contribute to the Employee’s Provident Fund was a violation of Article 14 of the Indian Constitution. Judges observed that such foreign workers mostly come to India on short-term employment visas, and after the contract period, many of them leave India. Compelling them to pay EPF ultimately robs them of cash without allowing them to gain similar returns in the future. In such a case, the court held that it was inconsistent and unreasonable to extend EPF coverage to foreign workers.

The Supreme Court disregarded the argument of a compulsory contribution by the Center as repulsive and as a retaliation measure to honor social security agreements. In the case of the agreement, the foreign employees are either absolved of the requirement of being members or they enjoy the privilege of withdrawing the corpus sum whenever they leave India before they attain the age of 58, instead of waiting till their retirement age.