EPFO raises wage ceiling to Rs 25k, coverage up by Rs 1 crore

The Employee Provident Fund Organisation (EPFO) has raised the wage ceiling for mandatory contributions, increasing it from Rs 15,000 to Rs 25,000 per month. This change will bring an additional one crore workers into the social security net and lead to higher pension payouts for existing Employees Pension Scheme (EPS) contributors.

The increase was necessary due to rising minimum wages, with the last revision occurring in September 2014 when the ceiling was more than doubled from Rs 6,500. The new threshold will take effect on Thursday, Vishwakarma Puja, and will require EPFO-registered entities with 20 or more workers to contribute 12% of monthly salaries towards PF and pension, with employees matching the contribution.

On average, the increase will amount to Rs 600 per month for those earning up to Rs 20,000. Labour ministry officials stated that the decision will result in increased savings for employees, who will still earn higher interest on their savings. However, concerns about employers restructuring their cost-to-company (CTC) to absorb the increased PF and pension liability were dismissed, with the labour ministry reaffirming that statutory PF contributions from employers cannot be deducted from employees' pay.

Indian Staffing Federation executive director Suchita Dutta noted that raising the threshold narrows the cost arbitrage that unorganised players exploit and rewards compliant employers, potentially accelerating the formalisation process. EPFO currently has nearly 8 crore contributing members across 7.7 lakh active establishments, while EPS provides pension benefits to around 82 lakh pensioners, with the total corpus managed by the retirement fund body nearing Rs 30 lakh crore.