Proposal Mooted To Raise EPFO Wage Ceiling To Rs 25,000–30,000

New Delhi, Jan 29 (KNN) A proposal to raise the monthly wage ceiling for coverage under the Employees’ Provident Fund Organisation (EPFO) to Rs 25,000-30,000 is back on the table for consideration. The move is aimed at bringing more employees under social security net.

The current ceiling is Rs 15,000 a month. The proposed increase in wage ceiling would enable EPFO to expand its subscriber base and also its corpus.

 The wage ceiling determines the salary level up to which EPFO contributions are mandatory for employees in covered establishments, reported the TOI.

Among the factors warranting increase in the wage ceiling are general inflation and upward pay revisions recommended by the Pay Commission for government employees.  

Employers, Unions Differ on New Threshold

The government had earlier considered raising the limit to Rs 25,000, but the proposal was shelved amid resistance from employers, some of whom argued that a higher cap should be accompanied by lower contribution rates. Employee unions, meanwhile, have pushed for a higher ceiling of Rs 30,000.

The existing limit, set in September 2014, has remained unchanged for over a decade, despite a sharp rise in wages across states. 

In many regions, even minimum wages for unskilled workers now exceed Rs 15,000, leaving a large section of low-income earners outside the social security net.

Earlier this week, the Supreme Court asked the labour ministry to review the wage ceiling within four months, giving fresh momentum to the proposal.

Raising the threshold is expected to significantly expand EPFO’s subscriber base and bring more workers, particularly from the unorganised sector, under the retirement fund framework. 

Labour Codes May Support Expansion of Coverage

The move comes as the new labour codes, which have already been notified and are likely to be implemented in the coming months, aim to ensure that wages constitute at least 50 percent of an employee’s total remuneration, with the rest paid as allowances. Officials said clearer wage definitions would help reduce disputes over EPFO eligibility.

At present, contributions are capped at wages of Rs 15,000, limiting the accumulation potential for many workers. An increase in the ceiling would raise contribution levels and help build a larger retirement corpus over time, aided by compounding. 

Recently, EPFO also mandated that subscribers maintain a minimum balance of 25 percent of their corpus, while easing withdrawal norms. As of FY24, EPFO had nearly 7.4 crore active contributing members, while the total number of member accounts, comprising both active and inactive contributors, stood at around 32 crore.

(KNN Bureau)