Raising EPF wage limit

The Employees' Provident Fund (EPF) currently mandates compulsory membership for employees with a basic monthly salary of up to ₹15,000. Those earning more than this are not required to join the scheme. Raising this basic salary threshold has long been a demand of trade unions and other organisations. The Union Finance Ministry has granted in-principle approval to raise the EPF wage limit to ₹25,000. A final decision will be taken only after the approval of the Union Cabinet. Once the new limit comes into force, it is expected to pave the way for lakhs of private-sector employees to receive social security benefits.

Under the new proposal, all employees drawing a basic salary between ₹15,000 and ₹25,000 will mandatorily come under the scheme. With the increase in the wage limit, employers will have to make mandatory contributions to the provident fund and pension scheme for a larger number of employees. This is expected to increase salary and social security costs for both government and private institutions. The EPF wage limit was last revised in 2014, when it was raised from ₹6,500 to ₹15,000.

As the wage limit rises, the monthly contributions made by both employees and employers will increase, resulting in a substantially larger provident fund corpus at the time of retirement. Since contributions to the Employees' Pension Scheme (EPS)—which receives a portion of the employer's contribution—will also increase, the monthly pension received after retirement is expected to rise accordingly. At the same time, since a larger PF contribution may be deducted from the salaries of employees earning above ₹15,000, their monthly take-home pay could decline slightly. This could temporarily affect low- and middle-income employees.

According to Labour Ministry estimates, raising the wage limit will enable more than one crore additional workers to receive social security benefits. It is also expected to lead to a significant increase in the EPF and EPS funds. At present, the Employees' Provident Fund Organisation (EPFO) manages assets worth ₹26 lakh crore and has 7.6 crore active members. Both figures are expected to change once the new proposal comes into effect.

As the proposed change will increase employers' financial burden, they may also seek to increase the number of contract workers while reducing permanent staff. Even if the Union Cabinet grants approval, implementation is unlikely to begin for at least six months, as companies will need time to update salary software and other systems. The new wage limit is likely to come into effect from April 1, 2027.