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Ministry of Overseas Indian Affairs18-September, 2008 14:38 IST
|Cabinet approves Social Security Agreement
between India and France
Major Benefits to Indian Work Force in France
|The Union Cabinet today approved the signing of a Social Security Agreement between India and France that will result in major benefits for Indian nationals working in France. Under the agreement, workers on short term contract up to 5 years, do not have to make any social security contribution provided they continue to make social security payment in India. These benefits shall be available even when the Indian company sends its employees to the French Republic from a third country. Indian workers shall be entitled to the export of the social security benefit if they relocate to India after the completion of their service in France. The self-employed Indians in France would also be entitled to export of social security benefit on their relocation to India. The period of contribution in one contracting state will be added to the period of contribution in the second contracting state for determining the eligibility for social security benefits.
India and France had finalised the social security agreement after negotiations held in New Delhi from 26-29 August, 2008. The agreement is likely to be signed by the two countries later this month.
There are about 2,85,000 Indians in France. Out of this, a large number of Indians are working as professionals and self employed persons. Therefore, a bilateral social security agreement with France is a significant requirement from the point of view of the Indians working there.
Government has already approved signing of similar agreements with Germany, Netherlands, Oman and Bahrain. These agreements are slated to be signed next month. Negotiations are currently being carried on for conclusion of an agreement with Switzerland. Discussions are scheduled with Norway and Sweden in the next few days. India has already signed a Social Security Agreement with Belgium.
Most of the developed countries have an umbrella social security system mandated by law. It is funded through mandatory contribution from all working people and their employers (in a prescribed ratio) in order to provide multiple benefits like old age pension, disability insurance, health insurance and unemployment insurance. Generally the contribution is in the form of a fixed percentage of income subject to a maximum lumpsum limit.
Indian workers are often posted to these 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 by him is simply lost. Similarly, the self-employed Indians in these countries despite having made contribution throughout their active life spent in these countries get deprived of any benefits in case they relocate to India in old age, which is often the case. Another disadvantage is that due to the high rate of social security tax, the Indian companies become less competitive while bidding for projects in these countries.
Bilateral social security agreements with these countries can protect the interests of Indian professionals persons 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) and 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. Such agreements would also make Indian companies more competitive since exemption from social security contribution in respect of their employees substantially reduces costs. Such bilateral agreements also provide for totalisation of insurance periods pertaining to both countries for determination of entitlement to benefits.
The Overseas Indian Community is estimated at over 25 million people spread across more than 110 countries. The community falls under two categories –the persons of Indian origin (PIOs) and the non-resident Indians (NRIs). The latter segment includes the various categories of overseas Indian workers such as unskilled, skilled, professionals and self-employed. Most of the low skilled Indian workers are concentrated in the Gulf region and Malaysia. Professionals and self-employed Indians are found mostly in developed countries like the EU member states, the USA, Australia, New Zealand, and Japan etc.
The future opportunities for overseas employment are considered high. At present about 54% of the population of India is in the age group below 25 years. By 2020 India will be the world’s youngest nation with a workforce estimated at 820 million as compared to 400 million today. On the other hand the population of most of the developed countries is aging. Obviously, for their sustained economic growth these countries would need a large emigrant workforce in future. This migration is likely to be of short to medium term duration with migrants returning to their home country after completing the employment period. India is likely to become a major source of migrant professionals due to its vast reservoir of technically qualified manpower in sectors like Information Technology, Engineering, Health, Finance and Management.
(Release ID :42929)