EPFO Wage Ceiling Hike to ₹25,000 Deferred for Now

The Centre has deferred its proposal to increase the mandatory wage ceiling under the Employees' Provident Fund Organisation (EPFO) from ₹15,000 to ₹25,000 per month, as per The Moneycontrol report.  

As per the report, the proposal has not been withdrawn but will be taken up only after consultations with industry and other stakeholders. The government is currently focused on limiting additional compliance costs for businesses as the new labour codes move towards implementation. 

Existing EPFO Framework 

The wage ceiling for mandatory EPFO coverage has remained at ₹15,000 a month since 2014. Employees with a basic salary up to this limit must be enrolled under the Employees' Provident Fund (EPF) and Employees' Pension Scheme (EPS).  

For employees earning above the threshold, enrolment is not mandatory unless both the employer and employee agree to contribute. Both employers and employees contribute 12% of the employee's basic salary every month.  

While the employee's contribution is fully credited to the EPF account, the employer's share is divided between the EPF and the EPS. At the current ceiling, the maximum statutory contribution is ₹1,800 each from the employer and employee every month. 

Cost Concerns 

Raising the wage ceiling to ₹25,000 would increase the mandatory monthly contribution to ₹3,000 each from employers and employees. According to report, this additional outflow is one of the reasons the proposal has been kept on hold. 

Industry executives estimate that the Code on Social Security and the Code on Wages could increase statutory liabilities by 15% to 20%.  

The information technology sector has also reported spending more than ₹1,000 crore on compliance related to the new labour code provisions. 

Potential Increase in Coverage 

An internal assessment by the labour ministry estimates that a higher wage ceiling could bring more than 10 million additional workers under mandatory EPFO coverage.  

Labour unions have sought a revision for several years, arguing that the current threshold no longer reflects salary levels for many low and mid-skilled workers, particularly in metropolitan cities. 

Read More: RBI Imposes Monetary Penalties on 5 Co-operative Banks for KYC and Regulatory Violations! 

Conclusion 

No timeline has been announced for revising the EPFO wage ceiling. The government has indicated that any decision will follow stakeholder discussions and an assessment of its financial impact. 

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