Karl Waheed Cabinet d'Advocats
Executive summary: The much awaited ratification of the treaty between France and India on social security coverage occurred on 22 March. This treaty is now in effect and will allow Indian assignees to avoid contribution to retirement funds under the French social security system, while on secondment assignment in France. Such assignees will nevertheless be required to make contributions to French social security for health coverage. We have reproduced below the detailed analysis published initially in our Client Alert of 18 June 2010.
What does the treaty change
Ever since the globalisation of the economy, India has progressively become the world's provider of highly technical services, primarily in the IT area. One of the biggest difficulties experienced by Indian service providers, when sending their Indian personnel to execute international service agreements, has been the high cost of social security compliance in France. Since there was no bi-lateral treaty between France and India on social security matters, Indian service providers had to make all the French social security contributions, the biggest component of which is the state health insurance.
During the negotiation of the bi-lateral treaty, Indian service providers had hoped that this treaty would allow them to keep the Indian assignees on Indian regime, and escape the high cost of French social security contributions for health insurance, as is the case with assignees from many other countries with which France has a bi-lateral treaty.
Unfortunately this will not be the case here. The Indian service provider will have to subscribe to French state health insurance. They will however be able to maintain the Indian assignee on the Indian retirement plan and avoid French retirement contributions. The present state of social security regulations (after the décret 2009-34 of 9 January 2009) would have allowed the Indian employer to opt out of the French basic retirement contributions anyway. In our opinion this long awaited bi-lateral treaty does not bring a significant change in social security considerations of assignment of Indian personnel to France, except to enlarge the avoidance to include the complementary retirement (the AGIRC/ARRCO contributions).
Purpose of the treaty
The stated purpose of the treaty is to facilitate professional mobility between France and India, to improve the attractiveness of France for Indian investors, to respond to the demand of French companies doing business in India, and Indian companies doing business in France, by facilitating the movement of workers.
Secondment under this bi-lateral social security treaty would allow the maintenance of retirement regimes in home countries, and make temporary assignments abroad more attractive to French employees. Having said this, retirement contributions being only a fraction of the social security contributions, the increase in the attractiveness for Indian and French investors and workers, which is the focus of the impact study discussed by the parliament, is all quite relative.
Beneficiaries of the treaty and risks covered
The scope of the treaty covers salaried and non-salaried workers, including civil servants. The treaty allows the maintenance of the social security in the sending state only with respect to retirement benefits, invalidity, survivor rights, for a maximum period of 5 years. On the other hand, it does not cover health and accidents at work and work related illness. For these risks, French employees seconded in India and Indian employees seconded in France, will have to continue to be covered under the social security insurance of the country where work is performed. In other words Indian workers being seconded to France will be exempted from contributions to the retirement funds, but shall continue to be registered and make contributions to the relevant health insurance fund (URSSAF of Bas-Rhin).
Article 10 of the treaty nevertheless allows the signing States to agree to increase the scope of the exemptions.
Retroactive application of the treaty
The treaty does not provide for retroactive application for persons who had been already sent to one of the contracting states before the effective date of the treaty. They may however benefit under the terms of the treaty and be seconded from its effective date.
The CLEISS (Centre de liaisons européennes et internationales de sécurité sociale) shall be the liaison authority in France which will liaison with the social security authorities of India.