The Central government may soon raise the wage ceiling under the Employees’ Provident Fund (EPF) scheme. The current limit of Rs 15,000 per month could increase to Rs 21,000.
This would mark the first increase since September 2014. At that time, the limit had been more than doubled, from Rs 6,500 to Rs 15,000. By raising this limit, the government aims to extend social-security benefits to a larger number of workers, ensuring a more secure retirement and financial future for those earning under this threshold.
According to a report by ET, the government’s proposed changes also include lowering the headcount threshold required for a company to qualify for EPF registration under the Employees’ Provident Fund Organisation (EPFO). Together, these changes could increase EPF coverage significantly, giving more workers access to EPF and pension benefits.
Expanding social security is part of a broader initiative to improve financial protections for employees across various sectors.
One major effect of the wage ceiling increase would be on employees’ eligibility for the Employees’ Pension Scheme (EPS). Currently, EPF participants with a basic salary above Rs 15,000 are ineligible to join EPS. With a raised ceiling of Rs 21,000, those who join EPF with a salary exceeding Rs 15,000 would also qualify for EPS enrolment.
This would allow these employees to receive pension benefits upon retirement, adding a layer of financial security for individuals in this salary range. However, enrolling in EPS would mean that a portion of the employer’s EPF contribution (8.33 per cent of the total 12 per cent) is redirected to EPS, thus reducing the balance accumulated in the employee’s EPF account.
The increase in the wage ceiling would also affect the contributions made to EPS. Currently, EPS contributions are capped at Rs 1,250 per month, calculated at 8.33 per cent of the Rs 15,000 wage limit. The remaining amount of the employer’s 12 per cent contribution goes to the employee’s EPF account, along with the employee’s personal contribution.
The government’s decision to potentially raise the EPF wage ceiling limit is expected to broaden the scope of social-security coverage, offering pension benefits to more employees while balancing contributions across EPF and EPS.
