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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

Election Quagmire

Dec 26, 2024
3 min read

Updated: Jan 2, 2025

Election Quagmire

Mozambique is at a perilous crossroads. The Constitutional Council’s recent ruling upholding the contentious October election results has entrenched the ruling Frelimo party’s long grip on power. Yet the outcome has done little to calm the fury simmering in the streets. The announcement confirmed Daniel Chapo’s presidency and gave his challenger, Venancio Mondlane, a few extra percentage points — an arithmetic adjustment that has only deepened public distrust in the electoral process. With over 110 lives lost in post-election violence, the nation’s path seems headed toward more bloodshed, instability, and economic crisis.


Mozambique’s political history offers insight into its current crisis. After gaining independence from Portugal in 1975, the country became a one-party state under Frelimo (Mozambique Liberation Front), a Marxist-Leninist movement that emerged victorious in the struggle against colonial rule. The party’s early years were marked by ambitious but uneven socialist experiments, including nationalized industries and land redistribution. However, these policies struggled to take root in a war-torn society.


After defeating the Portuguese, Mozambique was plunged into a brutal 15-year civil war with the Renamo rebel group, backed by apartheid-era South Africa and Rhodesia. The conflict, which ended in 1992, killed over a million people and left the country among the world’s poorest. Though Frelimo adopted a multiparty system and market reforms in the 1990s, it never truly relinquished its grip on power.


Chapo, like many Frelimo leaders before him, stands as a product of this historical continuity. His predecessors, including outgoing President Filipe Nyusi, were veterans of the liberation struggle. Yet their reverence among older Mozambicans has not translated into support among the country’s youth.


Mozambique’s demographics underscore the depth of the crisis. With more than half of its 34 million people aged 19 and below, the country is one of the youngest in the world. For many of these young people, the triumphs of the liberation era are distant echoes. Instead, their formative experiences are defined by soaring unemployment, endemic corruption, and chronic insecurity. The north, plagued by an Islamist insurgency since 2017, symbolizes Mozambique’s decline, with over a million displaced and Cabo Delgado in ruins despite its gas reserves. Cyclone Chido’s destruction in December worsened the region’s plight. Mondlane, leader of Podemos, tapped into widespread discontent with Frelimo, particularly among disillusioned urban youth. Although officially winning just 24 percent, he claims a majority, accusing Frelimo of electoral fraud.


The weeks following the election have been among the most violent in Mozambique’s recent history. Protesters, galvanized by Mondlane’s fiery rhetoric, have clashed with security forces in Maputo and beyond. Businesses have shuttered, ports have stalled and neighbouring countries have temporarily closed borders, further isolating the beleaguered nation.


Frelimo’s response has been predictably authoritarian. Soldiers patrol the streets, the internet is intermittently shut down, and thousands of demonstrators have been arrested. Yet this heavy-handedness is as much a sign of weakness as strength. Unlike in previous decades, when state machinery was firmly aligned with Frelimo, cracks are beginning to show in the party’s ability to command allegiance.


Mozambique’s descent into chaos is a grim reminder of the fragility of postcolonial states with entrenched ruling parties. While Botswana, South Africa and Namibia have seen opposition parties gain ground in recent elections, Mozambique remains trapped in the inertia of a liberation-era monopoly.


Mozambique’s future now hinges on whether its leaders—both in government and the opposition—can rise above the zero-sum politics that has long defined its landscape. For now, the streets remain restless, the nation divided and the revolution unfinished.

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