The rising number of Indians being deputed on overseas assignments every year reflects the increasing mobility of the average employee.

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Similarly, companies across the world recognise India as a potential business hub in the Asia-Pacific region and have been deputing/ seconding their employees in India.

Not just the experience, international work exposure is also aspired given the benefits in the form of higher salary package and better perquisites.

With these benefits on one hand, one tends to ignore the potential leakage in the cash benefits to the employee/ employer given the mandatory country specific regulations.

One such regulation, which could make a material difference to the salary package of any employee, is ‘social security contribution’.

In addition to the contributions made in the home country, it is often observed that an employee deputed to a foreign country is also required to contribute to the mandatory social security schemes in the host country.

Typically, in such a scenario, both countries generally require the employer and the employee to make social security contributions in the prescribed ratio as per their domestic laws.

Paying dual social security contributions turns expensive for the employers following equalisation policy for their assignees (i.e., in simple terms, bearing additional costs incurred by the assignee pursuant to the relocation).

Further, such contributions are generally considered as sunk costs as the employees are unable to derive the benefits of the contributions made due to their ineligibility to comply with the withdrawal norms.

In the case of inbound employees from countries with which India has not entered into a social security agreement, a contribution to the Indian provident fund is mandatory although the employee continues to make social security contribution in his home country.

Such dual contributions can act as a crucial financial deterrent for companies sending expatriates to work in India.

In order to avoid the above situations of making social security contributions in the home and the host country, India has signed social security agreement with Germany and Belgium, which are already in force.

Agreements with countries like Denmark, France, Switzerland, Luxembourg and Hungary have been signed; but are yet to be effective.

A social security agreement is a bilateral instrument to protect the interests of the workers in the host country. It being a mutual arrangement between two countries, the double coverage is eliminated and the employee as well as his employer is required to make contributions only in one country.

In order to avoid the double coverage, the employer is required to obtain a certificate of coverage/ detachment certificate from the relevant social security authority in its home country.

Such a certificate would serve as an official confirmation, indicating that the employee is exempt from making any social security contributions in the host country.

In this world of globalisation, where the geographic boundaries do not hold significance for the migrating human resource, it is essential that such agreements are rapidly signed between countries.

Given that more than millions of Indian people constitute the global mobile workforce spread across 100 nations across the globe, it is imperative that India has an appropriate social security agreement network sooner than later — an initiative that has begun.

This initiative shall not only reduce the costs for the India Inc, which encourages mobilisation of its human resources across boundaries, but shall also provide an impetus to the employees to accept such employment opportunities outside their home country. This will, in turn, improve output for the nation, both in real and monetary terms.

The writers are senior tax professionals with Ernst & Young. Views are personal