top of page

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

Deepening BJP-Sena rift exposed

Writer: Abhijit Mulye
Abhijit Mulye
Feb 28
2 min read

Mumbai: Corridors of power in Maharashtra are witnessing a growing sense of unease. Stern and quick disciplinary actions against senior bureaucrats are rare in state administration. The recent suspension of a senior IAS officer for failing to brief a minister during an ongoing assembly session has sent shockwaves through the bureaucracy. It has also laid bare the intense power struggle between ruling alliance partners, the BJP and the Shiv Sena.


The controversy erupted when presiding officer Dilip Lande ordered immediate suspension of Maharashtra Pollution Control Board (MPCB) Member Secretary M. Devendar Singh and Joint Director Satish Padwal. It is an unwritten parliamentary convention that presiding officers refrain from directing such severe administrative actions directly from the chair. However, the environment department acted with unprecedented speed. Sources indicate that the file implementing these suspension orders has already reached Chief Minister Devendra Fadnavis’ office.


Babus Baffled

This swift administrative compliance has caused a significant flutter among top officials. Many bureaucrats feel the Fadnavis administration is setting a dangerous precedent. Others quietly admit that the officers simply became collateral damage in a fierce political crossfire.


The root of this administrative crisis lies in the fraught relationship between two key political figures. The environment department is headed by BJP Minister Pankaja Munde. Meanwhile, the MPCB is chaired by Shiv Sena leader Siddhesh Kadam. The two leaders reportedly do not see eye to eye.


M. Devendar Singh, the suspended IAS officer, is widely considered to be close to senior Shiv Sena minister Sanjay Rathod. During his earlier tenure as the district collector of Ratnagiri, Singh also developed close ties with powerful Sena minister Uday Samant. Bureaucratic circles suggest that Singh was appointed as the MPCB member secretary last year primarily due to strong recommendations from Samant and Sanjay Rathod.


Against this backdrop, the political rivalry between Munde and Kadam reached a boiling point.


According to an MPCB insider, Kadam allegedly issued oral instructions to board officials ordering them not to share any information with minister Munde or her office without his prior consent. Caught between a hostile chairman and an inquiring minister, officers naturally shied away from providing crucial briefings.


Sensing this deliberate blockade of information, frustrated Munde spilled the beans on the floor of the House. She admitted her inability to answer legislators’ questions due to non-cooperative officials. The issue quickly escalated, likely beyond the minister’s own imagination. The presiding officer intervened, and the bureaucrats ultimately bore the brunt of the political dysfunction. Top officials now privately acknowledge that this entire episode is a direct outcome of the shifting power dynamics between the BJP and the Shiv Sena.


This incident is not an isolated case of administrative cracking of the whip. Recently, the government initiated strict disciplinary action against an assistant charity commissioner in Gondia simply for participating in a lucky draw without prior permission from her superiors.


Together, these incidents are sending a chilling message down the administrative spine. While the government attempts to project an image of strict discipline and accountability, the bureaucracy is increasingly feeling the heat of coalition politics. Officials are now acutely aware that navigating the fragile egos of alliance partners is just as critical as their administrative duties.

Comments

bottom of page