The Ministry of Finance's Department of Expenditure has given the green light to raise the EPF wage ceiling from Rs 15,000 to Rs 25,000, according to a report from Moneycontrol.
Citing a government source, the report mentioned that the exact date when the increased EPF wage ceiling will be implemented will be revealed after the Cabinet gives its approval.
If this report holds true, a new group of salaried employees will be covered by mandatory provident fund and pension plans.
The expenditure department has now approved the proposal to increase the Employees' Provident Fund (EPF) wage ceiling to Rs 25,000 per month, as stated in the Moneycontrol report, which quoted the source.
Initially, there was a proposal to bump up the ceiling to Rs 30,000, but the approved amount is Rs 25,000, according to the Moneycontrol source, who added that this will now be presented to the Cabinet for final approval.
The EPF wage ceiling of Rs 15,000 was set nearly 12 years ago in September 2014.
More employees to become eligible for EPF, EPS, report says
The Employees' Provident Fund (EPF) and Employees' Pension Scheme (EPS) framework now only requires coverage for workers earning a basic salary of up to Rs 15,000 per month. Employers are not required by law to enrol workers who make more than this.
Once the new rule is implemented, employees earning between Rs 15,000 and Rs 25,000 per month as basic pay would also be covered if the cap is raised to Rs 25,000, the report claims.
This means employers will need to contribute for a larger portion of their workforce, which will lead to increased payroll costs, the report noted.
EPF wage implementation date
While the concept of raising the EPF wage ceiling is progressing, it probably wouldn't be implemented immediately after Cabinet approval, according to the report.
Businesses and employers will need adequate time to modify their payroll systems, compliance processes and related operational arrangements. So, the report suggests there might be a transition period before the revised wage ceiling takes effect.
Existing wage ceiling and contribution details
According to the EPF website, mandatory EPF and EPS coverage applies to employees earning a basic wage of up to Rs 15,000 per month in registered establishments with 20 or more workers, as per the updated Employees' Provident Fund Organisation (EPFO) framework.
The rule states that new joiners earning basic pay and dearness allowance up to Rs 15,000/month must enroll in the EPF and the EPS. Those earning more than this can opt out or join voluntarily via a joint declaration.
EPF, EPS contribution split: Standard 12% employee and 12% employer contribution, where a portion of the employer's share (8.33%) goes toward the pension scheme (EPS) up to the statutory wage cap.
What is Employees' Provident Fund?
The Employees' Provident Fund is an interest-earning fund run by the EPFO. An employee and their employer contributes a predetermined percentage of the employee's basic wages and dearness allowance to the EPF. The employer's contribution is further divided between the EPF and the EPS.
