EPFO Wage Limit Increase: Government Considering Hike to Rs 21,000 for Enhanced Employee Social Security

The central government is reportedly reviewing plans to raise the minimum wage ceiling under the Employee Provident Fund (EPF) from the current ₹15,000 to ₹21,000. This move aims to extend greater social security benefits to employees in the organized sector. The EPF wage limit was last updated in 2014 when it was increased from ₹6,500 to ₹15,000. Since then, no changes have been made to this threshold.

In addition, the government may reduce the minimum employee requirement for EPF coverage from 20 to between 10 and 15 employees per organization. This would allow more companies to fall under EPFO's coverage, helping more workers benefit from social security schemes.

How the Wage Limit Increase Will Affect Employees and Employers

Higher EPF and EPS Contributions: With the wage limit increased to ₹21,000, a greater portion of an employee's salary will contribute to the Provident Fund and Employee Pension Scheme (EPS). Currently, both employees and employers contribute 12% of the basic salary to the EPF. Out of the employee’s 12% contribution, 8.33% goes into EPS and 3.67% into the EPF account.

Impact on Monthly Savings: A higher minimum wage threshold means employees’ EPF accounts will see more substantial contributions, which could aid in better retirement savings. The increased EPS contribution would also enhance employees' pension benefits post-retirement.

Increased Coverage for Smaller Companies: By lowering the minimum employee threshold for EPF registration, smaller companies would be included under EPFO's purview, giving more workers access to retirement savings and social security benefits.

The proposal for raising the wage ceiling has been a frequent demand from employee unions and has been discussed multiple times in meetings of the Central Board of Trustees of the EPFO. This potential change indicates the government's commitment to strengthening social security measures for a broader spectrum of employees in the organized sector.