EPFO wage ceiling raised to Rs 25,000; up to 1 crore workers may gain cover
The Union Cabinet has raised the EPFO wage ceiling to Rs 25,000 a month from Rs 15,000, a move Labour Minister Mansukh Mandaviya says could bring 50 lakh to 1 crore more workers under mandatory social security cover.
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved an increase in the wage ceiling for mandatory coverage under the Employees' Provident Fund Organisation (EPFO), raising it to Rs 25,000 per month from the existing Rs 15,000.
Labour and Employment Minister Mansukh Mandaviya said the change could draw between 50 lakh and one crore additional beneficiaries into the social security net. "We estimate that between 50 lakh and 1 crore new beneficiaries will gain from this," he said, adding that the higher ceiling would extend social security benefits to many employees who currently remain outside EPFO's ambit.
The revised threshold is to take effect from Thursday, September 17, which is observed as Vishwakarma Jayanti.
The decision widens mandatory EPFO coverage to employees earning in the Rs 15,000 to Rs 25,000 bracket. For this group, it opens access to provident fund savings, pension protection under the Employees' Pension Scheme (EPS) and insurance cover under the Employees' Deposit Linked Insurance Scheme (EDLI), subject to applicable provisions.
The EPFO wage ceiling was last revised in September 2014, when it was set at Rs 15,000 per month.
Puneet Gupta, Partner, People Advisory Services-Tax at EY India, said the step would broaden social security coverage but carried cost implications for both employers and employees. Mandatory EPF contributions would now apply on wages up to Rs 25,000 a month instead of Rs 15,000, which is expected to boost retirement savings and coverage, he said.
Employers, Gupta noted, could face higher PF, pension and EDLI contributions, particularly for staff earning between Rs 15,000 and Rs 25,000, where contributions are presently capped at the statutory ceiling. Employees in that salary band may also see their take-home pay shrink because of the larger employee PF contribution.
He added that employers should wait for the formal notification and detailed implementation provisions before gauging the full impact of the revised ceiling.