EPFO Salary Limit: Major shock to EPFO members. The central government has decided to delay a proposal to increase the mandatory EPFO wage ceiling from Rs 15,000 to Rs 25,000 to prevent adding more financial strain on companies already dealing with higher costs due to the new labor laws. A senior official mentioned that further financial pressure on the industry is not desired, and any wage adjustments will be finalized after thorough consultations with relevant stakeholders.
Industry experts highlight that the Social Security Code and the Wage Code have led to a 15 to 20 percent increase in statutory obligations for businesses. Particularly, the IT sector has spent over Rs 1,000 crore solely on adhering to these new labor regulations. The existing Rs 15,000 threshold dictates the mandatory EPFO contributions, where employees earning above this amount can opt out of contributing to EPF and EPS. Employers are not obliged to enroll these high-salaried employees with the EPFO.
Under the current regulations, both employees and employers must contribute 12 percent of the employee’s basic salary monthly to the EPF account. The employee’s entire 12 percent goes to EPF, while the employer’s 12 percent is divided into 8.33 percent for EPS and 3.67 percent for EPF. Increasing the limit to Rs 25,000 would require a monthly deposit of Rs 3,000 (from both sides) into the employee’s EPF account, which is seen as an added financial burden that the government is keen to avoid imposing on industries presently.
Raising the salary cap to Rs 25,000 would encompass over 10 million more individuals in the social security system, as per the Labor Ministry’s assessment. Labor groups have long advocated for this threshold hike, especially in metropolitan areas where low- and mid-skilled workers often earn more than Rs 15,000 per month. Government officials believe that elevating this limit would make all such workers mandatory EPFO members, granting them access to benefits like provident fund and pension.