At a meeting of the Union Cabinet chaired by Prime Minister Shri Narendra Modi, a decision has been taken to increase the wage ceiling prescribed for EPFO membership from ₹15,000 to ₹25,000 per month. Following the approval of the proposal of the Ministry of Labour and Employment, more than 51 lakh employees across the country will now be able to come under the coverage of the scheme for the first time. 

Until now, an employee joining employment at a wage exceeding ₹15,000 per month was directly excluded from the coverage of the Employees’ Provident Fund (EPF), and consequently could not avail himself/herself of benefits such as provident fund, pension and insurance. With the implementation of the revised ceiling, every employee earning between ₹15,000 and ₹25,000 per month will now automatically come within this social security framework and will receive coverage in accordance with the applicable scheme rules.

The direct impact of this decision will be that employees in this wage category will now become entitled to save through the Provident Fund, secure pension benefits in old age through the Employees’ Pension Scheme (EPS), and receive insurance protection under the Employees’ Deposit Linked Insurance Scheme (EDLI).

Over the past decade, wages in the country have steadily increased, incomes have improved, and employment opportunities in the formal sector have also expanded. In several States, even the minimum wage had reached levels close to the earlier ceiling of ₹15,000. Updating the wage ceiling had therefore become a necessity in view of changing economic and employment conditions.

The Government expects that this measure will not only bring a larger number of jobs within the formal social security framework, but will also improve employee retention in companies and provide people with greater financial security after retirement. It also reinforces the principle that, irrespective of where a person is employed, social security should remain associated with the employee. From the perspective of employers, better social security benefits are also expected to help in retaining employees and maintaining higher levels of employee morale.

The decision is expected to impose an additional annual burden of approximately ₹11,339 crore on the Government exchequer, compared with the current annual expenditure of around ₹10,250 crore. Over the next five years, the total expenditure is estimated to reach approximately ₹56,696 crore.

The Employees’ Provident Fund Organisation (EPFO) is counted among the largest social security organisations in the world. The Organisation currently administers three major social security schemes—the Employees’ Provident Fund (EPF), the Employees’ Pension Scheme (EPS), and the Employees’ Deposit Linked Insurance Scheme (EDLI). According to the existing figures, approximately 7.98 crore members associated with around 7.68 lakh establishments regularly contribute to the system, while around 82 lakh people are receiving pension under EPS.

The Government has stated that the working population is the most important link in the country’s development story. At a time when wages are increasing, incomes are improving and formal employment is expanding, raising the EPFO wage ceiling will ensure that the reach of social security also expands at a corresponding pace.

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RN

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