The Centre has put on hold a proposal to increase the mandatory Employees’ Provident Fund Organisation (EPFO) wage ceiling from Rs 15,000 to Rs 25,000 a month amid concerns about imposing additional financial costs on companies, according to a Moneycontrol report.

The proposed revision could have brought more than 1 crore additional workers under mandatory provident fund and pension coverage. However, the government has reportedly decided to defer the move as businesses face higher compliance costs following the implementation of the new labour codes.

Government Defers EPFO Wage Ceiling Revision

A senior government official told Moneycontrol that the proposal had not been abandoned and the wage ceiling would eventually be increased after consultations with stakeholders.

“The government doesn’t want to put extra financial burden on companies right now. The wage ceiling will be raised, but only after proper stakeholder consultation,” the official was quoted as saying.

The government reportedly believes that increasing the mandatory wage ceiling at this stage would add to the statutory costs faced by businesses.

The revision is expected to be reconsidered after consultations with industry representatives and other stakeholders, though no timeline has been announced.

Current EPFO Wage Ceiling Stands At Rs 15,000

The statutory wage ceiling for mandatory contributions under the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS) is currently Rs 15,000 a month.

The limit has remained unchanged since 2014.

Employees earning a basic salary of up to Rs 15,000 a month are required to contribute 12 per cent of their basic pay towards EPF.

Employers also contribute 12 per cent, with part of their contribution directed towards the EPS and the remaining amount deposited in the employee’s EPF account.

Under the current ceiling, the maximum mandatory contribution is Rs 1,800 each from the employee and employer.

Over 1 Crore Workers Could Have Entered Mandatory EPFO Coverage

If the wage ceiling had been increased to Rs 25,000, the maximum mandatory EPF contribution would have risen to Rs 3,000 each for employees and employers.

The proposed revision was also expected to significantly expand the number of workers covered by the mandatory EPFO framework.

An internal Labour Ministry assessment cited in the report estimated that raising the wage ceiling by Rs 10,000 could make EPF and EPS coverage compulsory for more than 1 crore additional workers.

Labour unions have sought an increase in the wage ceiling for several years, arguing that many low- and mid-skilled workers in metropolitan cities now earn more than Rs 15,000 a month.

Workers earning above the existing threshold are not automatically covered under mandatory EPF enrolment, making participation optional in certain cases.

Higher Compliance Costs Prompt Government To Delay Move

According to the report, the Centre believes the current environment is not suitable for increasing statutory costs for companies.

Industry executives cited in the report said the implementation of the new labour codes had increased companies’ statutory liabilities by around 15 to 20 per cent.

Businesses in the information technology sector alone have reportedly incurred more than Rs 1,000 crore in additional compliance costs because of the new rules.

Against this backdrop, the government has decided to defer the wage ceiling revision until wider consultations are held with industry and other stakeholders.

EPFO Wage Ceiling Hike Not Dropped, No Timeline Announced

Government sources cited by Moneycontrol said the proposed increase in the wage ceiling would eventually be taken forward after stakeholder consultations.

However, no timeline has been announced for the revision.

The EPFO currently manages a corpus of around Rs 27 lakh crore to Rs 28 lakh crore and has nearly 8 crore active members, making it one of the world’s largest social security organisations.

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