The government is considering increasing the wage ceiling for mandatory Employees’ Provident Fund (EPF) contributions from the current Rs 15,000 per month to Rs 25,000.
This move could bring more workers under the social security net, ensuring a larger portion of employees contribute to and benefit from the EPF system.
If approved, the proposal may be presented at the Central Board of Trustees of the EPFO next month and could come into effect from April 1, according to reports.
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Who Will Be Affected?
Currently, EPF contributions are mandatory only for employees earning up to Rs 15,000 per month.
Since this limit hasn’t been revised since 2014, many low- and mid-skilled workers with higher salaries are not covered under mandatory EPF.
Raising the limit to Rs 25,000 will include a larger section of the workforce, making EPF contributions compulsory for employees earning between Rs 15,000 and Rs 25,000.
Impact on Employees and Employers
For employees:
Salaries between Rs 15,000 and Rs 25,000 will now have higher monthly EPF deductions.
Take-home pay may reduce slightly, but retirement savings will increase.
For employers:
They are required to match the employee’s EPF contribution, increasing payroll costs.
Labour-intensive sectors may feel the impact more due to the higher contribution burden.
Changes to PF-Linked Benefits
If implemented, all EPFO-linked benefits—including provident fund accumulation, pension contributions, and insurance cover—will also be aligned to the new Rs 25,000 ceiling, ensuring a larger number of employees benefit from social security schemes.
Why Is the Change Happening Now?
The proposal gained urgency after the Supreme Court directed the EPFO to revise the wage ceiling within four months.
The court noted that rising wages and inflation have excluded many workers from social security coverage.
The current Rs 15,000 ceiling has remained unchanged for over a decade, despite significant wage growth, making this update necessary to expand coverage and strengthen retirement savings for employees.