Expenditure Department Approves EPF Wage Ceiling Increase to Rs 25,000

The Expenditure Department has granted approval to increase the EPF wage ceiling to Rs 25,000, aiming to expand mandatory provident fund and pension plans to more employees.

The Department of Expenditure, Ministry of Finance, has approved increasing the EPF wage ceiling from Rs 15,000 to Rs 25,000, a report from Moneycontrol claims.

Quoting a source from the government, the report claimed that the exact date from when the increased EPF wage ceiling will be implemented will be known after the Cabinet’s approval.

It the report is true, a new group of paid employees will be covered by mandatory provident fund and pension plans.

The proposal to increase the Employees' Provident Fund (EPF) wage ceiling has now been approved by the expenditure department at Rs 25,000 per month, the Moneycontrol report said, quoting the source.

Initially, there was a proposal to raise the ceiling to Rs 30,000, but the approved proposal is for Rs 25,000, the source reportedly said, adding that the matter would now be placed before the Cabinet for its approval.

The EPF wage ceiling of Rs 15,000 was set nearly 12 years ago in September 2014.

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.

After 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.

Employers will now have to make mandated contributions for a higher portion of their staff, which will increase payroll expenses, the report said.

Even as the idea of a higher EPF wage ceiling is progressing, it is unlikely that it will be implemented right away following Cabinet approval, as per the report.

Businesses and employers will require adequate time to modify their payroll systems, compliance processes and related operational arrangements. Therefore, some transition time may be provided before the revised wage ceiling comes into effect, the report said.

As per 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, governed by the updated Employees’ Provident Fund Organisation (EPFO) framework.

As per the rule, it is compulsory to join the EPF and the EPS for new joiners earning basic pay and dearness allowance up to Rs 15,000/month. Employees earning more than this can opt out or join voluntarily via 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.

Employees’ Provident Fund is an interest-earning fund administered 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.