EPF Cover Wage Limit to be Raised to ₹ 21,000

Good news for EPF subscribers, as cover limit for wages to be raised from ₹ 15,000 to ₹21,000

The government is planning to increase the mandatory ceiling for Employees’ Provident Fund to ₹21,000. While the wage limit right now is ₹15,000. With this step taken by EPFO the annual Employees Pension Scheme (EPS) outflow will raise by 50%. It will be approx. ₹ 3,000 crore according to data received.

This proposal of labor ministry was pending from a long time. If the proposal is implemented it will increase the number of active EPF subscribers from 3.75 crore to 4.25 crore. The finance ministry has already given the Green signal to the proposal. The finance ministry has instructed labour ministry to determine the financial connotation of the plan and proceed accordingly.

According to current scenario the employees and employer both contribute 12% of the basic pay to EPF. The employer contribution is further divided into 8.33% of the pay towards EPS and 3.67% of the pay towards EPF. The employer also contributes 0.5% towards employee deposit linked scheme (EDLI), and 0.65% as EPF administrative charges and 0.01% as EDLI handling fee.

Although the limit exists for mandatory cover, yet the employer and employee can opt for the EPF scheme even if the salary levels are higher. The government also pays 1.16% of the basic salary towards EPS for subscribers who earning less than ₹15,000 a month.

The government provides a grant to the tune of ₹3,000 crore per annum towards payment of minimum pensions of ₹1,000 per month. The Central Board of Trustees, the highest decision-making body of the Employees’ Provident Fund Organisation (EPFO), have approved the proposal to raise the wage cap for mandatory EPF cover to ₹5,000 per month for organised-sector workers long ago.

Following this, the labour ministry sent the proposal to the finance ministry for its approval which would require to be notified by the government subsequently. Since inception, EPFO has raised the wage threshold for nine times with the last revision in November 2014 from ₹6,500 a month. The wage threshold for medical/cash and insurance benefits under the Employees’ State Insurance Corporation (ESIC) was also raised last year to ₹21,000 per month, from ₹15,000 previously.

ESIC, another social security venture of the government, had in September last year raised the threshold to ₹21,000 per insured persons in sync with the hike in minimum wages. In ESIC, the employer contributes 4.75% of the wages and the employee 1.75% The labour ministry has proposed that provident fund, pension and insurance benefits currently being accorded to a section of organized sector workers be extended to the entire working population under a comprehensive social security net. India has an around 49 crore working population.