Provident Fund Wage Ceiling Hiked To Rs 25,000 From Rs 15,000 Per Month

The Centre has raised the wage ceiling for mandatory contribution to long-term savings of employees from Rs 15,000 to Rs 25,000. With this, over 51 lakh more employees are expected to be added to the Employees' Provident Fund Organisation (EPFO).

"Those falling within the Rs 15,000 to Rs 25,000 salary bracket will benefit from this change and will now be covered under the revised PF regulations. The estimated annual expenditure for the government on this measure will be Rs 11,339 crore," Union minister Ashwini Vaishnaw told reporters today.

"This has been a long-standing demand and the Prime Minister approved it in today's cabinet meeting," he said.

The EPFO wage ceiling remained unchanged from 2004 to 2014, before being substantially enhanced to Rs 15,000 in September 2014, the government said.

The latest move carries forward this approach by further raising the ceiling to Rs 25,000 to "reflect the sustained wage growth, rising incomes and a continued expansion of formal employment over the intervening years," the Centre said in a statement.

In the last 12 years since 2014, there has been a significant rise in average and minimum wages as also the cost of living. Data shows that the average income of a salaried employee has now reached approximately Rs 23,000 per month.

During this period, they were deprived of the benefits of the Employees Pension Scheme (EPS). The wage ceiling, hence, needed to be raised so that they also come under EPFO cover mandatorily.

The Centre said the EPFO operates one of the world's largest social security systems. The latest data shows it has 7.98 crore members and 7.68 lakh businesses.

Below is an indicative example to show what has changed.

Earlier, under the Rs 15,000 wage ceiling, if a man was making Rs 16,000 in total including both basic pay and Dearness Allowance, the employer was not required to enrol him in the EPF if he had just joined work. This was because the income of Rs 16,000 was more than the wage ceiling back then.

If the same person now earns Rs 16,000, he would come under the mandatory EPF coverage bracket since the wage ceiling has been raised to Rs 25,000.