The government is considering increasing the wage ceiling for mandatory Employees’ Provident Fund (EPF) contributions to as much as Rs 25,000 per month, up from the current Rs 15,000, a move that could
bring a larger number of workers under the social security net, according to a report.
If approved, the proposal may be placed before the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) at its meeting next month and could come into effect from April 1, according to The Economic Times report, citing a senior government official.
Who will be impacted?
Currently, EPF coverage is mandatory only for employees earning up to Rs 15,000 a month. Since this ceiling has not been revised since 2014, many low- and mid-skilled workers whose salaries have risen over the years are currently outside compulsory PF coverage. Raising the limit to Rs 25,000 would make EPF contributions mandatory for a much larger section of the workforce.
What changes for employees?
If the wage ceiling is increased, employees earning between Rs 15,000 and Rs 25,000 will see a higher deduction from their monthly salary, as EPF contributions are calculated as a percentage of wages. This would reduce take-home pay but increase long-term retirement savings.
What about employers?
Employers will also face higher costs, as they are required to match the employee’s EPF contribution. This could impact payroll expenses, especially for labour-intensive sectors.
How will PF-linked benefits change?
All EPFO-linked benefits, including provident fund accumulation, pension contributions and insurance cover, will be aligned to the revised wage ceiling if the proposal is implemented.
Why now?
According to The Economic Times, the proposal has been fast-tracked after the Supreme Court earlier this month directed the EPFO to revise the wage ceiling within four months, noting that rising wages and inflation have excluded a large number of workers from social security coverage.
The current Rs 15,000 ceiling has remained unchanged for over a decade, despite significant growth in wages during this period.
