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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

An Industrial Mirage

Correspondent
Feb 6, 2025
3 min read

Updated: Feb 7, 2025

Despite grand summits and tall proclamations by Chief Minister Mamata Banerjee, industry continues to elude West Bengal.

West Bengal
West Bengal

Every year, the Bengal Global Business Summit (BGBS) unfurls in Kolkata with all the pomp and circumstance of a royal durbar. Chief Minister Mamata Banerjee, flanked by industrial titans and foreign dignitaries, unfailingly touts West Bengal as India’s next big industrial hub. This year’s iteration was no different. Announcements reverberated across the Biswa Bangla Convention Centre - coal extraction from the mammoth Deucha Pachami block, investments in AI centers and commitments to vast infrastructural projects. Reliance Industries’ Mukesh Ambani, in a display of rhetorical flourish, declared Bengal to be in the throes of an economic renaissance, bolstered by his commitment to double the conglomerate’s investment to a staggering Rs. 1 lakh crore by 2030.


Yet, as the glittering rhetoric fades, the realities of West Bengal’s industrial landscape remain stubbornly unchanged.


Under Ms. Banerjee’s stewardship, has hosted eight editions of the BGBS, promising a transformation of the state’s economic fortunes. But a closer look at the state’s economic record reveals a starker picture.


The Deucha Pachami coal block, located in Birbhum district, is projected to generate over one lakh jobs and sustain the region’s energy needs for a century. However, such grand proclamations are reminiscent of West Bengal’s historical inability to translate industrial promises into concrete outcomes. The legacy of Singur looms large - a symbol of the state’s fraught relationship with industrialization. Tata Motors’ ignominious exit in 2008, following prolonged protests, exemplified the hostile environment that continues to deter large-scale investments.


The scars of Singur are emblematic of Bengal’s broader industrial malaise - a state caught between lofty aspirations and a profound anti-industry culture, nurtured by decades of Leftist governance.


The state’s track record remains blemished by its notorious anti-industry culture. Despite Banerjee’s claims of a “strike-free environment” and improved ease of doing business, West Bengal has struggled to shed its image as a graveyard for industry. Industrialists may attend summits and extol the virtues of the state’s leadership, but real investments are scarce, and transformative projects remain elusive.


Take the much-touted Deucha Pachami project itself. Though land has purportedly been acquired and the government has expressed gratitude to local and tribal communities, concerns about displacement and ecological impact persist. The promises of ancillary industries and job creation echo similar commitments made in the past, which failed to materialize meaningfully.


Even the presence of global business leaders like Mukesh Ambani and Sajjan Jindal at the BGBS must be viewed with caution. Their investments, though significant on paper, have not led to a broader industrial renaissance in Bengal. Reliance’s investment, while expansive in retail and telecommunications, does not represent a manufacturing or heavy industry boom that the state so desperately needs.


In the realm of economic metrics, the state’s Gross State Domestic Product (GSDP) growth is touted as a success, but it falls short of fostering sustainable industrial growth. Infrastructure projects, such as the proposed upgrade of Durgapur Airport into a second air hub, are necessary yet insufficient to draw in manufacturing giants.


The broader economic landscape in West Bengal remains constrained by structural issues. A persistent lack of skilled labour, coupled with bureaucratic red tape and unpredictable regulatory changes, continues to stifle industrial ambitions. Mamata Banerjee’s attempts to recast West Bengal as an industrial powerhouse, therefore, ring hollow. While the Bengal Global Business Summit provides a stage for grandiose announcements, the state remains trapped in its anti-industry legacy. Without substantive reforms and a shift in the socio-political fabric that has long resisted industrialization, West Bengal’s industrial revival will remain a mirage - visible from afar but unattainable upon approach. No amount of summitry or strategic announcements can substitute for genuine structural reform. If West Bengal is to break free from its industrial stagnation, it requires more than high-profile endorsements and lofty promises. It demands a fundamental rethinking of what it means to be an industry-friendly state.

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