The Union Cabinet on Wednesday approved an increase in the wage ceiling for mandatory coverage under the Employees’ Provident Fund Organisation (EPFO) from ₹5,000 to ₹25,000 per month. The decision is expected to extend mandatory social security coverage to more than 51 lakh additional employees.
Union Minister Ashwini Vaishnaw announced the decision at a briefing held after the Cabinet meeting. The proposal from the Ministry of Labour and Employment was cleared by the Cabinet chaired by Prime Minister Narendra Modi.
Under the existing rules, employees joining a job with monthly wages above ₹15,000 are not automatically brought under the EPF framework. As a result, they may remain outside mandatory provident fund, pension and related insurance protection.
Following the revision, employees earning between ₹15,000 and ₹25,000 a month will come under the statutory social security framework. The expanded coverage will provide access to provident fund savings, pension benefits through the Employees’ Pension Scheme (EPS) and insurance protection under the Employees’ Deposit Linked Insurance Scheme (EDLI), subject to the applicable scheme provisions.
Financial impact of the decision
The annual government expenditure after the wage ceiling enhancement is estimated at about ₹11,339 crore, compared with the existing annual budgetary support of around ₹10,250 crore. The projected expenditure over five years stands at approximately ₹56,696 crore.
The EPFO wage ceiling was last revised in September 2014, when it was raised to ₹15,000. Before that, the ceiling had remained unchanged from 2004 to 2014. The government said the latest increase takes into account sustained wage growth, higher incomes and the expansion of formal employment during the intervening period.
The measure is expected to encourage further formalisation of employment, strengthen long-term retirement security and widen access to portable statutory social security benefits.
EPFO administers the Employees’ Provident Fund, the Employees’ Pension Scheme and the Employees’ Deposit Linked Insurance Scheme. The latest data cited by the government shows that the organisation has around 7.98 crore contributing members across about 7.68 lakh contributing establishments. The EPS provides pension benefits to around 82 lakh pensioners.
The Ministry of Labour and Employment and EPFO will undertake the required statutory and administrative measures to implement the Cabinet’s decision.
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