EPFO Wage Ceiling Hike: Govt Directs Employers Not to Cut Salaries Amid 10 Million New Workers

As part of a significant overhaul, India's Employees' Provident Fund Organisation (EPFO) has revised its wage ceiling for calculating provident fund contributions, increasing the threshold from Rs 15,000 to Rs 25,000. In line with government directives, employers are now under pressure not to reduce employees' statutory wages.

The updated threshold is anticipated to expand mandatory coverage to over 10 million more workers, further accelerating workforce formalisation.

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“The employer's statutory contribution cannot simply be treated as an employee deduction merely by describing it as part of cost-to-company (CTC)," said the labour and employment ministry, in a statement. “The immediate priority should be to identify, calculate, enrol, report, remit and reconcile,".

The revised wage ceiling will affect most directly those earning more than Rs 15,000 but no more than Rs 25,000 in statutory wages. With the ceiling now raised to Rs 25,000. The maximum monthly contribution to the provident fund could go up to Rs 3,000 a month, from Rs 1,800 previously.

Employers can partly offset the additional financial burden by the incentive of up to Rs 3,000 per month for every additional employment created under the Pradhan Mantri Viksit Bharat Rojgar Yojana (PMVBRY), the ministry said. Workers who are newly covered by the mandatory framework will open the door to organised retirement savings. Pension benefits and insurance linked to employment.

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As part of its ongoing efforts to ensure compliance, the ministry has prompted employers to start evaluating the staff members who will be impacted by the upcoming shift, rather than delaying the process until the next salary review period. The change is slated to come into effect on September 17.

With the government emphasizing the importance of accurately calculating statutory employer contributions and maintaining employees' statutory wages in line with applicable regulations.