In the absence of a comprehensive network of Social Security Agreements (SSA) between India and other countries and even more importantly, with gaps in coverage having a deep impact on retirement planning, it may be time for the Indian Provident Fund laws to be amended to secure coverage for all Indian citizens, whether employed by an Indian entity or not.
The troubled uncertainty faced by a migrant population facing the economic consequences of #covid19 and lockdowns imposed by various Governments have brought to the forefront the inefficacy of social security systems across the world.
Most State provided social-security systems work better when providing coverage to citizens, who are expected to contribute into the system over a longer period to gain eligibility. But, a globalized workplace has pushed larger numbers to change workplaces, often outside their home country, resulting in several gaps in social security coverage for migrants.
Take the example of an Indian national travelling to the US. The short duration of work permits granted to such a migrant employee in the US results in the employee being unable to meet the minimum contributory period that would help her obtain coverage in the host country. The absence of continued social security contributions in India during the assignment reduce the overall benefit this employee can bank on at the time of retirement.
One solution would be for India to negotiate a Social Security Agreement (SSA) with countries into which Indian nationals typically migrate to. So far, SSA’s have helped Indian nationals moving to 18 countries (mostly in Europe) but negotiations between India and other countries with a larger population of Indian migrants have been slower.
When evaluating the impact of the absence of a SSA on Indian migrants, two regions / countries that welcome a higher number of Indian workers come to mind.
Both the Saudi Arabia and the UAE, countries that have a large Indian diaspora in the Middle East region, do not mandate social security contributions for foreign workers. As such, Indian workers in these regions / their employers need to make alternate arrangements to ensure private coverage. While the Pravasi Bharatiya Bima Yojana, a mandatory and affordable insurance cover, provides some level of insurance against sickness / death, this insurance scheme only covers workers travelling to 18 specified countries (most of them in the Middle East region) and then too only those workers who do not possess a higher education. This means employees who do not qualify for benefit under this scheme must purchase private insurance and figure out investment plans for their retirement.
On the other hand, the US social security system is mandatory for foreign workers with employer and employee contributions totaling roughly 15% of specified wages. The contributions do not however confer benefits unless FICA / Medicare contributions are made for at least 10 years, doubly impacting migrants who are forced to contribute into a scheme that will not provide any benefits while having to privately purchase insurance to cover the risks these schemes were intended to cover. A large population of Indian workers who move to the US either on a L1 visa (issued for a maximum duration of 5 years) or H1B visa (maximum duration 6 years) are impacted by the US social security contributions.
Multiple attempts have been made by India to negotiate a SSA with the US but with both countries grappling with #covid19, it will be some time before serious progress can be made on this front.
In the meantime, cross-border employees are left to handle the economic fallout of the pandemic on their own. If legislators were to put the pandemic to good use, one lesson to be learnt from it would be to bring all Indian citizens within the Indian social security coverage.
The Indian Provident Fund (PF) law as it stands now is only designed to cover an “employee” in employment with an Indian establishment / employer. International tax considerations often come into play that prevent continued Indian payroll this interrupting coverage for an employee temporarily sent to another country who cannot be covered unless she receives a wage from the Indian employer. Self-employed individuals are also not covered in the current PF law.
The new Social Security Code (pending legislation) makes it possible for the self-employed to seek coverage but is rigidly defined. The new Code also leaves out the migrant population who may be employees in an uncovered establishment (for eg: an employer outside India).
Amending the draft Social Security code to extend mandatory minimum social security coverage to all adult Indian citizens would help enhance the intended social security coverage rather than restrict coverage to the ‘self-employed’ / ‘platform workers’ / ‘gig workers’ as defined in the draft Code.
The Provident Fund authority in India, with about 45 million active members is possibly best equipped to implement a social security system that applies to all Indian citizens, irrespective of their employment status or location. The unique identification used to identify current PF members (i.e. Universal Account Number) may then be the equivalent of a Social Security Number and the new Social Security Code can truly be used as one platform to provide coverage to all citizens of India.
