Foreign National Employees and Statutory Benefits in India

Provident Fund (EPF) and International Workers

Under the Employees’ Provident Fund Scheme, Paragraph 83 of the EPF Scheme introduced the concept of an “International Worker” through a 2008 notification. This created a separate category for:

Foreign employees working in India; and
Indian employees working abroad.

The classification resulted in differential treatment, particularly regarding:

Contribution requirements; and
Withdrawal conditions.

StoneHill Education Foundation v. Union of India

Karnataka High Court, MANU/KA/1274/2024

In this case, Paragraphs 83 and 43A of the EPF Scheme were held unconstitutional. The Karnataka High Court held that there was no reasonable classification between an “excluded employee” and an “international worker.” The Court observed that imposing mandatory provident fund contributions on foreign workers, without corresponding benefits or a rational basis, violated Article 14 of the Constitution.

The judgment emphasized that differential treatment must satisfy:

An intelligible differentia; and
A rational nexus with the object sought to be achieved.

According to the Court, these requirements were absent in the present case.

Spice Jet v. Union of India

2025 SCC OnLine Del 827

A different view was taken by the Delhi High Court in this case. The Court upheld the constitutional validity of Paragraph 83 and held that:

International workers constitute a separate and valid class; and
Employers are liable to make provident fund contributions based on actual wages, without applying the statutory wage ceiling, unless exempted under a Social Security Agreement (SSA).

The Court accepted that the objective of social security and regulatory control justified such classification.

Current Position

In March 2026, the Supreme Court agreed to examine a plea challenging the EPF rules mandating provident fund contributions for foreign workers. Accordingly, the final legal position on this issue remains unsettled and continues to evolve.

However, the above discussion is limited to the EPF Act and the EPF Scheme.

Employees’ State Insurance (ESI)

The Employees’ State Insurance framework operates primarily on the basis of wage thresholds. Since employment visas for foreign nationals generally require a high level of skill and compensation, the wages paid to such employees would ordinarily exceed the wage limit prescribed under the ESI scheme. Further, unlike the EPF Scheme, the ESI framework does not specifically classify or distinguish “international workers.”

Under Section 2(26) of the Code on Social Security, “employee” is defined broadly as “any person.”

Accordingly, the statute does not distinguish between:

Indian citizens; and
Foreign nationals.

Therefore, except for the uncertainty relating to EPF obligations discussed above, other statutory benefits such as:

Maternity benefits;
Gratuity; and
Other employment-related social security benefits,

should apply equally to foreign nationals, provided the relevant eligibility conditions are satisfied.

Bonus

In practice, work-related visas are generally issued for shorter durations, such as three or five years. Consequently, many foreign workers may be engaged as:

Contract workers; or
Fixed-term employees,

rather than as regular employees.

Foreign Currency Considerations

Where remuneration is paid in foreign currency, the Foreign Exchange Management Act (FEMA) may become relevant. However, FEMA does not specifically provide either for or against entitlement to statutory bonus payments.