International Social Security agreements, often called "Totalization agreements," have two main purposes. First, they eliminate dual Social Security taxation, the situation that occurs when a worker from one country works in another country and is required to pay Social Security taxes to both countries on the same earnings. Second, the agreements help fill gaps in benefit protection for workers who have divided their careers between India and another country.
Need for SSA’s
Indian workers are often posted to foreign countries by their Indian employers on short term contract and during this period they continue to make social security contribution in India as per Indian law. Yet, they are compelled to pay contribution under the host countries legislation too. Moreover, they do not get any benefit from the social security contribution made abroad, because most countries do not allow export of social security benefit. Most countries also have a minimum contribution period criteria as a result of which if a worker stays abroad for a lesser period, the contribution made is simply lost.
Totalisation treaty generally covers the following benefits:
- Exemption from double social security contribution
- Exportability of Pension to home country or third country
- Totalisation of contributory periods for determining eligibility
SSA’s protect the interests of Indian professionals by securing exemption from social security contribution in case of short-term contracts (provided the worker is covered under the Indian social security system and continues to pay his contribution to the Indian system during the period of contract). The agreement also helps in exportability of benefits in case of relocation to India or any other country after having made social security contribution during a longer term employment, given the social security system extant in most countries. The agreements also provide for totalisation of insurance periods pertaining to both countries for determination of entitlement to benefits.
SSA’s make Indian companies more competitive since exemption from social security contribution in respect of their employees substantially reduces costs. And ensures employees are appropriately covered for social security needs either at home/ host location. Indian IT-BPM sector is the biggest beneficiary of these agreements because sector sends large number of skilled resources to work at foreign locations for short durations (less than 5 years).
- Ministry of Overseas Indian Affairs (MOIA) – is the Ministry responsible for signing SSA with other countries.
- Employee Provident Fund Organisation (EPFO) – is the nodal agency responsible for implementing these agreements from the Indian side.
NASSCOM has played pivotal role liaising with stakeholders within India and external Govt agencies in ensuring smooth implementation of SSA’s. NASSCOM has-
- Advised MOIA on list of nations where SSA’s will have maximum impact
- Been with GOI delegation to Germany to take up issues of non-coverage of Indian employees under the Posted workers agreement
- Brought about circular with clarification from EPFO to NOT consider outbound employees travelling to SSA countries as International Workers
- Setup numerous Stakeholders session with members and Govt agencies to iron out issues :
- Brought about clarification on International / Domestic workers (IW/DW) norms from EPFO
- Pointing out need for language change in Certificate of Coverage (COC) application form that puts Indian companies onerously w.r.t. host nations laws
- Taking up issues of delays in processing of COC by the EPFO
- Critically analysing each agreement for benefits it covers / or excludes, advising with revisions of provisions wherever necessary
- Pointing out anomalies w.r.t. treatment of employees posted with a Branch or Subsidiaries in any given agreement
- Helping MOIA & EPFO with model agreement that should be used for future agreements