The Employees’ Provident Fund Organisation (EPFO) may soon bring a major change for salaried workers. According to reports, the government is considering increasing the salary limit used for mandatory PF and pension contributions. The current wage ceiling of Rs 15,000 may be raised to Rs 25,000. Earlier, this limit used to be Rs 6,500.
The purpose of this change is to bring more than 1 crore additional employees under the EPF and EPS social security schemes. This salary limit decides who is automatically covered under the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS).
During an event in Mumbai, Department of Financial Services (DFS) Secretary M. Nagaraju said it is worrying that many people who earn just slightly more than Rs 15,000 per month do not get any pension benefits and often depend on their children in old age. He stressed that the old pension limits must be updated.
What are the current rules?
Right now, only employees earning up to Rs 15,000 as basic salary must be included under EPF and EPS. Anyone earning more than this can be excluded, and employers are not required to register them. Because of this, many private-sector workers earning low or moderate salaries are left without formal retirement savings.
New limit may be Rs 25,000
Reports suggest that EPFO is planning to increase the limit to Rs 25,000. The Central Board of Trustees is expected to discuss this proposal early next year. According to Labour Ministry data, increasing the wage limit by Rs10,000 could bring more than 1 crore extra employees under mandatory EPF and pension coverage. Trade unions have been demanding this change for a long time, saying that the current limit does not match today’s rising cost of living and salary levels.
EPFO funds to grow
If this change is approved, employees will contribute more every month, which will increase their EPF balance and improve their pension benefits. Currently, employees and employers both contribute 12% of the basic salary. The employer’s share is divided between EPF and EPS. With a higher salary base, contributions from both sides will increase. However, this also means that the cost per employee will rise for employers.
Why the government wants this change
The government aims to improve India’s social security system. The Atal Pension Yojana already has over 8.3 crore subscribers, and almost half of them are women. But India still faces a big gap, more than two-thirds of Indians do not have life insurance, and many young workers are not saving enough for their retirement. By increasing the EPF salary limit, more employees will automatically start saving for the long term through their PF and pension accounts.
How EPF contributions work now
Employees who fall under EPF rules contribute 12% of their salary to their PF account.
Employers also pay 12%, but their share is divided as follows:
- 8.33% goes to the pension scheme (EPS)
- 3.67% goes to EPF
If the salary limit is increased, both EPF and pension contributions will go up. This means employees will build a bigger PF balance and receive better pension benefits in the future.
