In brief
The notification of the Employees' Provident Funds Scheme, 2026 (‘2026 Scheme’) with effect from 1 July 2026, was anticipated to settle and provide clarity on the regulatory framework governing international workers under the Code on Social Security, 2020. However, it has done the opposite in one respect. The 2026 Scheme retains a dedicated framework for international workers and carries forward the substance of the erstwhile Paragraph 83 of the EPF Scheme, 1952 (‘1952 Scheme’) and Paragraph 43A of the EPS,…
Introduction
The notification of the Employees' Provident Funds Scheme, 2026 (‘2026 Scheme’) with effect from 1 July 2026, was anticipated to settle and provide clarity on the regulatory framework governing international workers under the Code on Social Security, 2020. However, it has done the opposite in one respect. The 2026 Scheme retains a dedicated framework for international workers and carries forward the substance of the erstwhile Paragraph 83 of the EPF Scheme, 1952 (‘1952 Scheme’) and Paragraph 43A of the EPS, 1995.
International workers who were members under the 1952 Scheme continue to remain covered under the new regime. Further, employees originating from countries that have entered into a Social Security Agreement with India may continue to contribute where they seek to avail the benefit of detachment. Notably, following the recently concluded free trade and double contribution convention arrangements, the United Kingdom and Northern Ireland have now been expressly brought within the ambit of this framework.
What the 2026 Scheme has conspicuously failed to address is the very feature that forms the fulcrum of the constitutional challenge. Under the prescribed statutory framework, an Indian employee is brought within the fold of mandatory provident fund contributions only if his or her basic wages do not exceed the prescribed threshold of INR 15,000 per month, beyond which coverage is voluntary, i.e., a matter of choice.
International workers, however, remain subject to contributions on their entire salary from the first rupee earned, without the benefit of any corresponding wage ceiling. It was precisely this stark disparity in treatment between similarly situated classes of employees that gave rise to the challenge under Article 14 of the Constitution of India. Since the 2026 Scheme preserves this distinction in substance and effect, the constitutional infirmity alleged in respect of the earlier regime survives unchanged and inevitably carries forward into the new framework.
For employers engaging foreign nationals, the practical consequence is that the change in the governing instrument has not changed the exposure. The obligation on such employers continues to contribute on the entire salary of an international worker continues, , and the legal question of whether that obligation can be sustained remains open before the courts.
The constitutional challenge
The uncertainty stems from the decision of the Karnataka High Court in Stone Hill Education Foundation v. Union of India (2024), in which the court struck down Paragraph 83 of the 1952 Scheme and Paragraph 43A of the EPS, 1995 as arbitrary and unconstitutional. The court held that requiring an international worker to contribute on full salary while an Indian worker enjoyed the protection of a wage ceiling offended the guarantee of equality. It also weighed the grievance that Indian workers posted abroad were compelled to contribute under foreign social security laws without becoming entitled to any benefit, since they seldom met the minimum qualifying period in those countries.
The ruling created immediately complicated the compliance landscape.. In a press release dated 7th May 2024 the Employees' Provident Fund Organisation, \, acknowledged the said judgment and indicated that it was evaluating its options, including a challenge before the Hon’ble Supreme Court. Employers were left to decide whether to continue contributing on full salary in reliance on provisions that a High Court had declared void, or to reduce contributions and risk recovery proceedings if the decision were later reversed.
The notification of the 2026 Scheme has done little to resolve this uncertainty. By re-examining the international worker framework in substantially the same form as the predecessor scheme, the executive has preserved the very design that the Karnataka High Court found wanting, which means the reasoning in Stone Hill (supra) case remains capable of being pressed against the 2026 Scheme.
The opposing view and the judicial split
Rather than diminishing over time, contestation surrounding this position has intensified, making it an increasingly debated and scrutinized standpoint. . The Delhi High Court in SpiceJet Limited v. Union of India and LG Electronics India Pvt. Ltd. v. Union of India, W.P. No. 2941 of 2012, decided on 4 November 2025, upheld the validity of the 2008 and 2010 notifications, being GSR 706(E) and GSR 148, that introduced Paragraph 83 and mandated full salary contribution for international workers. The Court reasoned that the EPF legislation is welfare legislation whose benefit is not confined to low-income employees, and that a wage ceiling is a legislative choice rather than a constitutional command, so its absence for international workers does not by itself offend equality.
The result is a direct divergence between High Courts on the same provisions. One line of authority treats the absence of a ceiling as discriminatory, while the other treats it as a permissible policy design within a welfare statute. Until the Supreme Court resolves the conflict, neither view binds employers across the country, and the answer to whether full salary contribution is lawful depends in practice on the jurisdiction in which the establishment finds itself.
The position is particularly problematic for employers with multi-state operations. The same category of employee gives rise to an enforceable obligation in Delhi but not in Karnataka, where the obligation has been judicially struck down. Rather than addressing this conflict, the 2026 Scheme preserves the very framework from which it arises, thereby importing existing judicial inconsistencies into the new regime and undermining the objective of regulatory uniformity.
Practical implications for employers
Pending authoritative resolution of the conflict, continued compliance remains the course least exposed to legal risk. The 2026 Scheme is presently in force, and its underlying framework has received judicial affirmation from the Delhi High Court. By contrast, the contrary view rests on a single-judge decision of the Karnataka High Court, the correctness of which remains subject to further appellate scrutiny.
In these circumstances, an employer who withholds or limits contributions in reliance on Stone Hill (supra) assumes the risk that the impugned provisions may ultimately be sustained. If that occurs, the consequences are unlikely to be confined to the payment of arrears and may extend to statutory interest and other attendant liabilities. Against that backdrop, the incremental benefit of non-compliance is difficult to justify. The more prudent course is continued compliance, coupled with the preservation of any restitutionary claim that may arise should the provisions ultimately be invalidated.
A different consideration arises in the case of workers who are genuinely detached from jurisdictions with which India has concluded a Social Security Agreement. The controversy concerning the validity of the international worker framework does not diminish the significance of the exclusion expressly incorporated within it. An individual who remains covered by the social security system of the home state and possesses a valid certificate of coverage continues to fall within the category of an excluded employee. The 2026 Scheme retains the mechanisms of detachment and totalisation for agreement countries, with the consequence that contribution liability may not arise at all where the statutory conditions are satisfied. For such employers, meticulous maintenance of the Certificate of Coverage and contemporaneous records establishing the period and terms of detachment remains the most effective safeguard against unwarranted contribution demands.
The broader point is that the transition from the 1952 Scheme to the 2026 Scheme has not resolved the fundamental controversy surrounding international workers. The legislative vehicle has changed, but the substantive architecture remains materially the same. As a result, the constitutional and statutory objections that have long been directed at the earlier framework continue to subsist under the new regime. The unresolved divergence between the Delhi and the Karnataka High Courts therefore persists. Unless and until the Supreme Court settles that conflict, the legal position will remain marked by uncertainty.
For employers, the practical implications are clear: compliance obligations should be assessed on the assumption that the framework remains operative, recognised exclusions should be carefully documented and invoked where applicable, and compliance strategies should remain sufficiently flexible to accommodate the Supreme Court's eventual determination.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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