Wage ceiling under EPFO to be raised steeply to Rs 30,000/month

The government is likely to raise the wage ceiling for mandatory inclusion of workers under Employees’ Provident Funds (EPF) and the Employees’ State Insurance Corporation (ESIC) schemes soon.

The move will bring nearly 10 million of more employees under the ambit of the social security net.  

Currently, the wage ceiling for inclusion under EPFO is Rs 15,000 per month, and under ESIC, is Rs 21,000 per month. The thresholds for both the schemes are likely to be raised to Rs 30,000 per month, official sources said.

Deliberations of raising the wage ceiling were held at the Employees’ Provident Fund Organisation’s (EPFO) Central Board of Trustees (CBT) meeting on Saturday. “The final call is expected to be taken in the CBT’s February meeting, but most members and the labour ministry are in favour of doubling the current ceiling,” a source who attended the meeting said.

Wage ceiling under EPF and ESI refers to the salary threshold up to which EPF and ESI contribution is mandatory under law. The amount of ‘employee’s contribution’ towards EPF and ESI is required to be deducted from the salary of employees by the employer and be deposited with the EPFO and ESIC. The employers are required to match the contribution. 

As per the extant rules, employees earning more than Rs 15,000 have an option to opt out of EPF coverage. In case this threshold is raised by Rs 15,000, the number of contributors will increase. Currently, the active subscribers under EPFO are around 70 million.

The current wage limit for EPFO is set at Rs 15,000 per month, revised from Rs 6,500 in 2014. Under the EPFO, both the employee and employer contribute 12% each to the EPF account for employees earning Rs 15,000 or less each month.  

The employee’s whole contribution goes into the provident fund account. But the employer’s contribution is divided into two parts – 8.33% is allocated to the Employees’ Pension Scheme (EPS) and remaining 3.67% goes into the provident fund account.

At present, the EPF contribution of an employee with a basic salary of Rs 15,000 comes to Rs 1,800 per month. But say, if this wage ceiling is revised to Rs 30,000, this contribution will rise to Rs 3,600 per month, on a mandatory basis. For employers too, this number will rise proportionately on a monthly basis;

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