Monthly deductions toward the Employees’ Provident Fund (EPF) are routine for most workers in India. While foreign employees in India currently contribute to the retirement savings scheme, the Supreme Court will now examine whether the law mandating their participation is valid.
The top court on Thursday issued notice to the Union government on a plea filed by South Korean multinational LG Electronics, which has challenged the requirement for foreign employees to enrol under the Employees’ Provident Fund Scheme, 1952. Managed by the Employees’ Provident Fund Organisation (EPFO), it’s a mandatory retirement savings scheme for employees in the organized sector, and requires contribution from both employer and employee.
LG moved the Supreme Court after the Delhi High Court in November 2025 upheld the validity of the rules, holding that the central government has the power to extend the EPF scheme to foreign nationals working in India. The High Court dismissed petitions filed by LG Electronics and airline SpiceJet, both of which had challenged the provisions.
However, only LG Electronics has approached the Supreme Court so far. SpiceJet has not joined the appeal.
Queries emailed to LG Electronics and SpiceJet remained unanswered till press time.
Paragraph 83
The dispute centres on Paragraph 83 of the EPF Scheme, introduced through government notifications issued in 2008 and 2010, which created special provisions for “international workers.”
An international worker broadly refers to a foreign national working in an establishment in India where the EPF law applies.
Under the rules, foreign employees working in India must contribute to EPF unless they qualify as “excluded employees.” This exemption generally applies to workers from countries that have a Social Security Agreement (SSA) with India and are already contributing to a social security system in their home country.
If no such agreement exists, foreign employees working in India must contribute to EPF regardless of their salary.
This differs from Indian employees, whose mandatory EPF contributions are calculated up to a statutory wage ceiling of ₹15,000, though both employer and employee may opt to contribute on higher salaries.
Companies that employ expatriate workers argue that the rule is unfair. They say the EPF law itself does not distinguish between Indian and foreign employees, but the new provisions created a separate category of “international workers” and imposed stricter requirements on them.
According to the companies, this violates the principle of equality, since foreign employees must contribute to EPF irrespective of their salary, while Indian employees are covered only up to the ₹15,000 wage limit.
They also argue that the rule creates difficulties for expatriates who come to India for short assignments, often lasting only a few years. Since EPF funds can typically be withdrawn only upon retirement or earlier in limited circumstances, companies say the requirement becomes burdensome for such workers.
Decade old dispute
The dispute dates back more than a decade. In March 2011, the EPFO issued a notice asking SpiceJet to deposit provident fund contributions for its foreign employees.
The EPFO later issued a summons in March 2012, directing the airline to provide records so authorities could determine the provident fund dues. SpiceJet subsequently approached the Delhi High Court in 2012, challenging both the EPFO action and the government notifications.
Nearly a decade later, LG Electronics India filed a similar petition in 2021, raising the same legal challenge.
Since both petitions involved the same issue, the Delhi High Court heard them together. In its November 2025 ruling, the court upheld the government notifications and said the EPF provisions for international workers were legally valid.
The High Court observed that foreign employees can be treated as a separate category because they usually work in India for short periods of two to five years, while Indian employees typically work until retirement. Because of this difference, the court said requiring foreign employees to contribute to EPF regardless of salary was reasonable.
The court also held that such classification does not violate the constitutional right to equality, as the law allows reasonable distinctions between different categories of workers.
LG Electronics has now moved the Supreme Court, which will examine the issue. The outcome will be closely watched by companies employing foreign workers in India. If the court upholds the existing rule, foreign employees will continue to contribute to EPF regardless of salary, potentially increasing compliance costs for companies.