EPFO UPDATE: The Supreme Court has directed the central government to seriously consider increasing the salary limit, or wage ceiling, for the Employees’ Provident Fund Organisation (EPFO). The court observed that this limit has not been changed for the past 11 years, despite a significant increase in inflation and salaries during this period. The court directed the government to decide on this matter within four months.
Currently, the rule is that employees with a monthly salary of more than Rs 15,000 are not covered under the mandatory EPFO social security scheme. A bench of Justices J.K. Maheshwari and A.S. Chandurkar issued this order while hearing a petition filed by social activist Naveen Prakash Nautiyal. The court also directed the petitioner to submit his presentation to the central government within two weeks so that the government can take a timely decision.
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Salary limit unchanged since 2014
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The lawyers representing the petitioner stated that the EPFO salary limit was last changed in 2014, when it was increased from Rs 6,500 to Rs 15,000. Since then, inflation has continuously risen, and minimum wages have also increased, but the EPFO limit has remained unchanged. As a result, millions of employees have been excluded from this social security scheme.
EPFO limit lags behind the minimum wage
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The petition also pointed out that the minimum wage set by the central and several state governments is now more than Rs 15,000. Therefore, many employees who are earning only the minimum wage are also falling outside the purview of the EPFO, even though this scheme was originally designed to provide security to employees.
Increase recommended in 2022
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According to reports, an EPFO sub-committee had recommended increasing the salary limit in 2022. The Central Board of Trustees also approved this proposal in July 2022. Despite this, the central government has not yet taken a final decision on the matter, which is questioned in the petition.
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The scheme has become more limited than before
According to the data provided in the petition, the scope of the EPFO scheme was quite broad in its initial decades and included employees from almost all categories. However, due to the lack of timely revisions to the salary limit over the past 30 years, the scheme has gradually excluded many employees. Important parameters such as the inflation rate, consumer price index, and per capita income were ignored during salary revisions.
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What will be the impact of the increased limit?
If the government increases the salary limit from Rs 15,000 to Rs 21,000 or more, millions of employees in the organized sector could come under the purview of EPFO. This would increase their retirement savings and provide them with benefits such as a pension and insurance. However, this will also impact employers and the government, as their contributions to the EPF will also increase.