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By:

Sumit Ranjan Das

21 August 2024 at 4:08:59 pm

EPFO’s Big Wage-Band Reset

Twelve years is a long time for a wage ceiling to remain unchanged. The last revision came in September 2014, when the limit was raised from Rs.6,500 to Rs.15,000. Last week, the Union Cabinet approved another increase, taking the ceiling to Rs.25,000 a month with effect from 17 September 2026. The government’s estimate is that more than 51 lakh additional employees will come within mandatory EPFO coverage as a result of the change. For employers and payroll professionals, however, the...

EPFO’s Big Wage-Band Reset

Twelve years is a long time for a wage ceiling to remain unchanged. The last revision came in September 2014, when the limit was raised from Rs.6,500 to Rs.15,000. Last week, the Union Cabinet approved another increase, taking the ceiling to Rs.25,000 a month with effect from 17 September 2026. The government’s estimate is that more than 51 lakh additional employees will come within mandatory EPFO coverage as a result of the change. For employers and payroll professionals, however, the headline number is only the starting point. The more important questions are who will be covered, which wages will be taken into account and how the revised provisions will be implemented. Wage Ceiling The existing wage ceiling of Rs.15,000 a month is being raised by Rs.10,000, or 66.7 percent, to Rs.25,000. The change takes effect from 17 September 2026 and marks the first revision since September 2014. The government expects more than 51 lakh additional employees to be covered. Estimated expenditure is about Rs.56,696 crore over five years, while annual government outgo is expected to rise to approximately Rs.11,339 crore. The standard contribution remains 12 percent each from the employee and employer, subject to applicable provisions. The Cabinet said the decision will expand access to provident-fund savings, pension protection under the Employees’ Pension Scheme (EPS) and insurance protection under the Employees’ Deposit Linked Insurance Scheme (EDLI), in accordance with the applicable scheme provisions. The wage ceiling is not merely an administrative threshold. It determines the point at which mandatory EPF coverage applies under the existing framework. At present, a fresh employee joining employment at wages above Rs.15,000 a month is not automatically brought within mandatory EPF coverage and may remain outside mandatory provident-fund, pension and associated insurance protection, subject to applicable statutory provisions. The revised ceiling will bring a substantial section of employees earning between Rs.15,000 and Rs.25,000 within the mandatory coverage framework. The government has also quantified the fiscal impact. The estimated expenditure is about Rs.56,696 crore over five years, while annual government outgo is expected to rise to approximately Rs.11,339 crore, compared with existing annual budgetary support of about Rs.10,250 crore. The Labour Ministry has linked the revision to sustained wage growth, rising incomes and the continued expansion of formal employment since the previous revision in 2014. Payroll Illustration Consider an employee earning Rs.22,000 a month who becomes subject to mandatory coverage under the revised ceiling. At the standard 12 percent contribution rate, if the full eligible wage is used as the contribution base, the employee’s contribution would rise from Rs.1,800 to Rs.2,640 a month, while the employer’s contribution would similarly rise from Rs.1,800 to Rs.2,640. Total monthly contributions would therefore increase from Rs.3,600 to Rs.5,280 — a combined increase of Rs.1,680. However, this should not be treated simply as Rs.1,680 of additional employee savings. Contributions are allocated between EPF and EPS components as prescribed, with the EPF component accumulating in the employee’s account and the EPS component providing pension benefits subject to scheme conditions. The Rs.22,000 example is illustrative, not a universal payroll formula. The final treatment of wage components, existing employees in this band, EPS allocation and transitional matters will depend on the statutory notification and EPFO implementation instructions. For payroll professionals, the immediate task is to assess the operational impact. Key questions include the effective date for existing employees and new joiners, which wage components will count towards PF, whether the 10 percent concessional rate for notified establishments will continue, how the revised ceiling will interact with EPS pensionable wages, and what changes will be required in payroll systems. The Cabinet approval establishes the policy decision; the formal Gazette notification and EPFO instructions will determine how it is translated into payroll processes. The revised ceiling is the first increase since September 2014 and is expected to bring more than 51 lakh additional employees, particularly those in the Rs.15,000-Rs.25,000 wage band, under mandatory EPFO coverage. For them, the change can expand access to provident-fund savings, EPS pension and EDLI insurance, subject to scheme provisions. For employers, it means reviewing payroll costs, employee data, eligible wage components, contribution calculations and compliance systems. The government has described the move as part of efforts to extend statutory social security and strengthen formal employment. The policy has been announced. For payroll professionals, the next chapter is implementation. (The writer is a Cost and Management Accountant and founder of TaxoDas. Views personal

Ajit Pawar’s Two-Handed Game

Jan 11
3 min read

Maharashtra’s most agile politician finds that even political acrobatics have a breaking point

NCP (Sharad Pawar) State President Shashikant Shinde and party MLA Rohit Pawar during a rally in Navi Mumbai on Sunday. | Pic: PTI
NCP (Sharad Pawar) State President Shashikant Shinde and party MLA Rohit Pawar during a rally in Navi Mumbai on Sunday. | Pic: PTI

Pune: In Maharashtra’s labyrinthine politics, few figures are as deft or as difficult to read as Deputy Chief Minister and Nationalist Congress Party (NCP) Ajit Pawar. As nephew of Sharad Pawar, the NCP’s grand old man, Ajit has spent the past three years perfecting a political manoeuvre that allows him to be both rebel and ruler: splitting his party to join the BJP-led Mahayuti government in Mumbai, while keeping a foot in the sentimental heartland of ‘Pawarite’ politics.


That balancing act is now being tested in the municipal elections of Pune and Pimpri Chinchwad, two cities that double as Ajit Pawar’s power base and political laboratory.


On paper, the arithmetic looks simple. The BJP and Ajit Pawar’s faction of the NCP are allies in the state government. Together they also share power with Eknath Shinde’s Shiv Sena. Yet on the ground in Pune, politics has been turned inside out. Ajit Pawar has stitched together a local understanding with his estranged uncle’s NCP faction - an alliance that has bewildered his partners in government and enraged the Congress, which promptly accused him of political double-dealing and demanded that he resign as deputy chief minister. Pawar ignored the demand, as he usually does.


Opportunistic Dealmaking

The oddity of the arrangement initially produced a curious stillness in the BJP’s ranks. Rumours swirled that Amit Shah, the Union home minister and the BJP’s chief enforcer, had given Ajit Pawar a free hand. Others speculated that the two Pawars were rehearsing a grand reunion that would eventually bring the entire NCP back into the orbit of the Narendra Modi government.


The suspense was broken this week by senior BJP leader and minister Chandrakant Patil, who chose to voice out loud what many in his party had been muttering in private. Why, he asked, have Sharad Pawar and Ajit Pawar come together? If they have done so today, might they not do so again tomorrow? And if that happens, should the BJP really be running a government with a reunited Nationalist Congress Party?


Shifting Gears

Patil’s intervention came just as Ajit Pawar had begun sharpening his rhetoric against the BJP, levelling corruption allegations that cut uncomfortably close to the bone. Until then, there had been an informal truce among the partners of the Mahayuti: fight local elections separately if necessary, but do not attack one another in public. Eknath Shinde’s Shiv Sena had honoured that understanding. So, initially, had Ajit Pawar. Then he changed tack.


From the BJP’s point of view, the shift was dangerous as it cannot allow Pawar’s accusations to go unanswered lest voters might actually start believing them.


The Congress, watching from the sidelines, has gleefully described the entire drama as a “fixed match.” In its telling, Ajit Pawar will rage against the BJP during the campaign, siphon off anti-BJP votes, and then dutifully return to the fold once the results are in. That may be too cynical even by Maharashtra’s standards. But it does capture a deeper truth that Pawar’s appeal lies precisely in his ability to speak in two voices at once.


For voters in Pune, this ambiguity is not merely theatrical. Ajit Pawar has spent years cultivating an image as a blunt-speaking local strongman who delivers roads, water and development. By attacking the BJP now, he taps into a reservoir of resentment among urban voters who are weary of the party’s dominance. At the same time, his position in the state government reassures business interests and cooperative barons that he remains plugged into the levers of power.


The risk is that such tactical brilliance can curdle into strategic confusion. If Pawar succeeds in mobilising a bloc of voters defined by their opposition to the BJP, what is he to do with them once the ballots are counted? Walk back into the arms of his saffron allies and risk being seen as a fraud? Or drift further towards his uncle, inviting the wrath of the party that currently keeps him in office?


The BJP, for its part, is no less conflicted. It needs Ajit Pawar’s numbers in the state assembly and his grip over the cooperative networks of western Maharashtra. But it also knows that the Pawars, uncle and nephew alike, have made careers out of using larger parties as ladders rather than lodestars. Patil’s public doubts were a thinly-veiled warning that such ambiguity has limits.


Whatever the outcome in Pune and Pimpri Chinchwad, Ajit Pawar will emerge with either proof that his two-handed game still works or a reminder that even the most agile political acrobat eventually has to choose which side of the rope he stands on.

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