The Union Cabinet on Wednesday (September 16) approved a proposal to raise the wage ceiling for mandatory coverage under the Employees’ Provident Fund Organisation (EPFO) from Rs 15,000 to Rs 25,000 per month.
The move is expected to bring more than 51 lakh additional employees under mandatory social security coverage. Union Minister Ashwini Vaishnaw announced the decision during a briefing after the Cabinet meeting.
According to a government release, the proposal was moved by the Ministry of Labour and Employment and approved by the Union Cabinet, chaired by Prime Minister Narendra Modi.
At present, salaried workers drawing a basic salary plus dearness allowance of up to Rs 15,000 per month in a covered establishment must join the EPF scheme. Employees earning above Rs 15,000 can also join voluntarily, provided both the employee and employer agree.
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With the new ceiling in place, employees earning between Rs 15,000 and Rs 25,000 per month will now come under the statutory social security framework.
What Changes for Employees?
The expanded coverage will give eligible employees access to provident fund savings, pension benefits under the Employees’ Pension Scheme (EPS), and insurance protection under the Employees’ Deposit Linked Insurance Scheme (EDLI), subject to applicable rules.
The EPFO wage ceiling was last revised in September 2014, when it was raised to Rs 15,000 per month. Before that, it had remained unchanged between 2004 and 2014.
The government said the latest increase takes into account the rise in wages and incomes, as well as the expansion of formal employment over the years.
Impact on Employers and the Government
The government estimates that the higher wage ceiling will result in an annual expenditure of around Rs 11,339 crore, compared with the existing annual budgetary support of about Rs 10,250 crore.
The move will also raise compliance costs for employers, since companies will now have to make mandatory provident fund and pension contributions for a larger share of their workforce.
The estimated expenditure over five years stands at around Rs 56,696 crore.
The government expects the decision to encourage formalisation of employment, strengthen long-term retirement security, and expand access to portable social security benefits.
EPFO currently administers the Employees’ Provident Fund, the Employees’ Pension Scheme, and the Employees’ Deposit Linked Insurance Scheme.
According to the latest EPFO data cited by the government, the organisation has around 7.98 crore contributing members spread across nearly 7.68 lakh contributing establishments. The Employees’ Pension Scheme currently provides pension benefits to around 82 lakh pensioners.
The Ministry of Labour and Employment and EPFO will now take the necessary statutory and administrative steps to implement the Cabinet’s decision.
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