The Employees’ Provident Fund Organization (EPFO) is preparing to make major changes to its rules. In the coming months, it is likely to raise the salary threshold for mandatory employee contributions to the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS) to ₹25,000 per month. Currently, the salary threshold is ₹15,000 per month. This is the statutory limit for mandatory contributions to the EPF and EPS, which are managed by the EPFO.
Employees with a basic salary of more than ₹15,000 per month have the option to opt out of both EPFO schemes. Employers have no legal authority to register such employees under EPF and EPS. The EPFO’s Central Board of Trustees is expected to discuss the issue at its next meeting – likely in December or January – where final approval could be given.
More than one crore will benefit
An official told Money Control that an internal assessment by the Labor Ministry suggests that increasing the wage threshold by ₹10,000 per month would make social security benefits mandatory for over 10 million people. The person added that labor unions have long demanded an increase in the wage threshold because many low- or medium-skilled workers in several metropolitan cities earn more than ₹15,000 per month. The higher threshold would make them eligible for the EPFO.
What do the current rules say?
According to current rules, both employers and employees are required to contribute 12% of an employee’s salary each month. However, the employee’s full 12% goes into the EPF account, while the employer’s 12% is split between EPF (3.67%) and EPS (8.33%). Officials said the increase in the salary limit will also accelerate the growth of EPF and EPS funds, leading to increased pension payments to employees upon retirement and the accumulation of interest accruals. The EPFO’s total corpus currently stands at around ₹26 lakh crore, and its active membership is around 76 million.
How will it benefit?
Experts say the proposed increase in the EPF salary limit from ₹15,000 to ₹25,000 per month is a progressive step towards expanding social security coverage and aligning this limit with current wage levels. They say this will help a large segment of India’s workforce achieve long-term financial security and retirement benefits, which have become increasingly relevant amid growing economic instability.
