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...

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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

Crack down on fake Mathadi workers

Nikhil Deshmukh

Apr 6, 2025

2 min read

Mumbai: The state government will take strict action against the growing menace of fake Mathadi workers and is planning a digital overhaul of the registration process of the head-loaders, Labour Minister Akash Phundkar has said.

The administration is developing a robust verification mechanism to identify and weed out fake workers, who are actually "extortionists in disguise". This includes linking Mathadi worker registrations with Aadhaar, biometric attendance systems and employer verification, the minister told PTI.

The government will not tolerate fraudulent elements exploiting the system at the cost of genuine labourers and industry stakeholders, he said.

Phundkar's remarks come amid growing discontent among industry bodies over the alleged misuse of the Mathadi Act.

The Maharashtra legislature last month passed the Maharashtra Mathadi, Hamal and Other Manual Workers (Regulation of Employment and Welfare) (Amendment) Bill, defining manual work as a “core activity” for the welfare of head-loaders and porters, removing ambiguity in the type of work which will remove bogus workers.

"Over the years, the number of fraudulent Mathadi workers -- those who are not actually engaged in manual labour but have obtained bogus registrations -- has increased significantly. These individuals have created an atmosphere of fear and extortion in several industrial regions of the state," Phundkar said.

"We are committed to protecting the genuine Mathadi workers, but will not allow fake ones to hijack the system," he said.

The Mathadi system, governed under the Maharashtra Hamal, Mathadi and other Manual Workers (Regulation of Employment and Welfare) Act, was created to protect manual workers engaged in loading and unloading activities.

The noble objectives of the Act are, however, being diluted by misuse, leading to chaos in labour markets and added costs for industries, the minister noted.

He said complaints have been received from various districts, including Pune, Nashik, Nagpur, Kolhapur and Chhatrapati Sambhajinagar.

"Several businessmen and entrepreneurs have approached us, saying they are forced to employ Mathadi workers who neither turn up for work nor contribute to the actual labour. This has increased financial strain and disrupted the business environment," he said.

The minister, without taking any name, accused a section of union leaders and politically connected individuals of backing these fake registrations.

To address the issue, the government is planning a digital overhaul of the registration process, Phundkar concluded.

EPFO’s Big Wage-Band Reset

Crack down on fake Mathadi workers

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