What is the India-UK social security pact? How will it benefit 75,000 Indian workers?

When you think of trade deals, one normally thinks of tariffs and levies. However, the UK-India Comprehensive and Economic Trade Agreement (CETA) isn’t just about tariff reductions, but focuses on the movement of professionals between the two countries.

That’s because, as the India-UK FTA comes into effect today (July 15), so does the Double Contribution Convention (DCC) agreement that the two nations agreed upon last July. As per this arrangement, the UK has exempted Indian workers and their employers from paying social security contributions for five years.

Let’s understand better what the Double Contribution Convention is and why it’s a big win for Indian professionals.

What is a Double Contribution Convention (DCC) agreement?

According to the British government website, a DCC is a type of Social Security Agreement (SSA) that coordinates the payment of social security contributions.

DCCs include a provision that allows employees (known as ‘detached workers’) to continue paying solely into their home social security scheme when they are temporarily working abroad for an agreed maximum period.

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Such agreements offer both businesses and staff protection and allow them to save on costs. It also contributes to the free movement of labour.

Notably, India has such agreements with countries like Belgium, Germany, Switzerland, France, Denmark, South Korea, and the Netherlands. Thus, Indians going abroad for employment are not required to contribute to social security schemes in these countries.

The Double Contribution Convention Agreement is part of the India-UK FTA signed by PM Modi and British PM Keir Starmer last July. File image/AFP

What have India and the UK agreed upon?

As per the agreement signed by the two countries, Indian workers who are in the UK temporarily will essentially be exempted from paying into the UK’s social security for a period of five years.

In fact, this was a key demand of India when negotiating the India-UK FTA in order to down on the additional cost burden associated with bringing in skilled Indian professionals on a short-term basis.

The same principle applies to UK workers in India. Currently, UK nationals qualify as ‘international workers’ under the Employees’ Provident Fund (EPF) Scheme in India, which mandates that employers contribute 24 per cent of the gross salary. Upon reaching the age of 58, individuals can claim a full refund of their contributions, along with interest, upon leaving India.

However, under the DCC, UK nationals temporarily working in India will be exempt from contributing to the EPF. Instead, they will continue to contribute to the UK National Insurance Contributions (NIC), ensuring that they maintain their social security benefits in the UK.

About 90-95 per cent of Indian professionals employed by Indian companies operating in the UK would benefit from the social security agreement between the two countries. Representational image/AFP

How do Indians benefit from this agreement?

With the FTA kicking into effect, the DCC also comes into play. As a result of this, more than 75,000 Indian workers and over 900 employers are expected to benefit. Moreover, industry experts estimate that the DCC would result in annual savings of over $600 million.

At present, Indian employees working in the UK and their employers contribute around 23 per cent of salary towards the UK National Insurance System. However, temporary workers often do not qualify for corresponding benefits, making these contributions a significant cost burden.

Speaking on the same, Commerce Minister Piyush Goyal said, “Regarding our young men and women who go there to work — often for two, three, or five years... previously, about 25 per cent of their salary was effectively wasted; the local government would take it, and the worker received no benefit from it. Now, we have finalised a Double Contribution Convention Agreement that will also come into effect on the 15th.

“For Indians going there to work in the services sector or other jobs for up to five years, the 25 per cent of their salary that the local government previously took will now be deposited into their Provident Fund accounts in India. That money will belong to them.”

Experts note that the agreement will give a major boost to IT majors like Tata Consultancy Services (TCS) and Infosys.

However, it’s important to note that the benefit applies only to “detached workers”, employees already working for an India-based employer who are temporarily sent to the UK for up to 60 months. It does not apply to Indians who move to the UK and take up local employment.

Additionally, Indian nationals working in the UK may still be required to pay the UK immigration health surcharge. This surcharge is a separate fee that contributes to the National Health Service (NHS) and is applicable to all foreign workers in the UK.

What will be the overall impact of the agreement?

Commerce Secretary Rajesh Agrawal has noted that the agreement will be a “game-changer” for India’s services sector and skilled workforce.

Additionally, the agreement will support mobility and continued social security coverage of the employees on temporary overseas assignments. This will enhance India-UK partnerships in the service sector, leveraging the high skills and innovative service sectors of both countries.

With inputs from agencies