Salary cuts? A missive to companies after EPF hike
The labour and employment ministry has instructed employers to maintain employees' statutory wages unchanged following the introduction of the ₹25,000 wage ceiling under the Employees Provident Fund Organisation (EPFO). This directive aims to alleviate concerns that the additional employer contribution within the enhanced wage ceiling might be deducted from employees' earnings.
The wage ceiling hike, from ₹15,000 to ₹25,000, took effect on September 17, aiming to cover over 10 million more workers in mandatory EPF coverage and further promote formalisation of the workforce. The ministry advises employers to consider their contribution to social security schemes as an investment in human resources, which can enhance employee satisfaction and retention.
The ministry emphasizes that employers' statutory contributions should not be mistaken for employee deductions, merely because they are part of the Cost-to-Company (CTC). It stresses that employers must ensure correct payments of statutory employer contributions and prevent any reduction in employees' statutory wages, in compliance with applicable laws.
The ministry acknowledges that there will be an anticipated rise in employers' expenses. However, it suggests that employers can counterbalance this additional financial burden by offering an incentive of up to ₹3,000 per month for each new job created under the Pradhan Mantri Viksit Bharat Rojgar Yojana (PMVBRY). Formalising the workforce also benefits India's position as an attractive investment destination.
Addressing concerns about lower take-home pay, the ministry clarifies that any increase in employees' share of EPF due to the wage ceiling hike will continue to earn interest at a higher rate, provide tax benefits, and contribute to a guaranteed pension along with free insurance coverage. While this may result in a minor trade-off for lifelong security, the ministry urges employers to promptly review affected employees and initiate the enrolment, reporting, and remittance processes.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
