As India and the United Kingdom (UK) secured a Free Trade Agreement (FTA) on May 6 after nearly three-and-half years of negotiations, a social security pact signed between the two nations stood out.
The UK agreed to the long-standing demand from Indian side to avoid double contribution to social security funds by Indian professionals working for a limited period in Britain.
The decision is likely to ensure savings of around 20 percent in the salaries of Indian workers in the UK, as per estimates of the Ministry of Commerce. It is expected to benefit more than 60,000 employees from IT sector alone. Besides, it will give a Rs.4000 crore competitiveness boost to Indian companies in the UK.
“In an unprecedented achievement, India has secured an exemption for Indian workers who are temporarily in the UK and their employers from paying social security contributions in the UK for a period of three years under the Double Contribution Convention. This will make Indian service providers significantly more competitive in the UK,” India said in its statement.
Social security contributions are payments made by workers and employers to fund pensions, healthcare, unemployment benefits, and other welfare programmes. The move would create new job opportunities for Indians in the UK and will also benefit a large number of Indians who are already working in the UK.
The double contribution convention, agreed upon by both the countries along with the FTA, is designed to prevent individuals from paying double social security contributions when they work or live in both countries.
Until now, Indian workers in the UK were compelled to pay a compulsory National Insurance (NI) worth £500 per employee a year, over and above all other taxes and health surcharge paid towards the National Health Service (NHS), as per a 2021 data.
Indian businesses operating in the UK also were reeling because of this as they had to cut down on the additional cost burden associated with bringing in skilled Indian professionals on a short-term basis.
India’s ask from the UK was for a social security agreement similar to what India has with countries such as Belgium, Germany, Switzerland, France, Denmark, South Korea, and the Netherlands. In these countries, Indians going abroad for employment are not required to contribute towards social security schemes of those countries. They and their employers can continue with social security schemes run by the Employees’ Provident Fund Organisation (EPFO) here in India while serving abroad.
India-UK FTA to help professionals, skilled youth
The FTA eases mobility for professionals including contractual service suppliers, business visitors, investors, intra-corporate transferees, partners and dependent children of intra-corporate transferees with right to work.
It also is in favour of independent professionals like yoga instructors, musicians and chefs. “Immense opportunities for talented and skilled Indian youth will open up in the UK which is a major global centre for digitally delivered services due to its strong financial and professional services sectors and advanced digital infrastructure,” read India’s statement.
“India has secured significant commitments on digitally delivered services for Indian service suppliers, specially in professional services such as architecture and engineering, computer related services and telecommunication services,” it added.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
