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New PF norms may check expat recruitment
By siliconindia
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Tuesday, 23 December 2008, 16:49 IST |
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New Delhi: Expats eyeing Indian firms for employment may face disappointment if firms reconsider recruiting them as an aftermath of the new norms set for provident fund (PF). As per the new rule, the companies have to deposit 12 percent of their expat workers' basic wages and a contribution from the companies matching that in Employees provident Fund Organisation's (EPFO) schemes, thus taking a toll on the hiring cost.
"In the present downturn, we see many persons of Indian origin (PIO) and overseas citizens of India who are looking towards India for jobs. Their job prospects may be adversely affected as employers would have to factor PF as additional cost to the company, specially as there is no certainty on whether the PF can be withdrawn when they want to go back," said Amitabh Singh, partner, (tax and regulatory services), Ernst & Young to Economic Times. Even Caterpillars India Executive Director for government relations Ram Krishna Subraman pinpoints that the move will also increase costs of engaging international executives. Thus, to escape the burden of increasing cost, most companies have approached CII and Assocham for a solution.
The EPFO scheme has also not limited the pension fund contribution as a share of basic pay for an international employee, unlike in the case of domestic workers. In the case of a domestic employee, there is a ceiling on pensionable salary at 
6,500 a month. Moreover, the companies are of the opinion that it will be difficult for the workers to retrieve their money incase they go back after a few years. Besides, the labour ministry order has left the companies confused in identifying an "international worker" covered under the order for an Indian company. To make matters complicated, the term 'international worker' also includes an employee working abroad for an Indian company, who is required under that country's laws to pay there for social security. Companies are confused if they have to contribute for the social security of their overseas staff in both the countries.
6,500 a month. Moreover, the companies are of the opinion that it will be difficult for the workers to retrieve their money incase they go back after a few years. Besides, the labour ministry order has left the companies confused in identifying an "international worker" covered under the order for an Indian company. To make matters complicated, the term 'international worker' also includes an employee working abroad for an Indian company, who is required under that country's laws to pay there for social security. Companies are confused if they have to contribute for the social security of their overseas staff in both the countries.