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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

Engineering Begins Where Jugaad Ends

Jun 25
5 min read

India’s journey from a developing nation to a developed one will depend on building institutions that deliver reliability, precision and scale.

AI generated image
AI generated image

The title may sound unfair to a concept that Indians rightly admire. After all, jugaad has come to symbolize creativity, resourcefulness and the ability to solve problems under difficult circumstances. Yet the title captures an important truth. Jugaad demonstrates that something can work. Engineering ensures that it works every time, safely, reliably and on a scale. As India aspires to become a developed nation and a global technology leader, understanding the difference between the two has never been more important.


On roads across rural India, one occasionally encounters a remarkable sight: a vehicle assembled from parts never meant to go together, yet somehow transporting people, produce or equipment. Nearby, a farmer may have modified an irrigation pump to suit local conditions. A mechanic may have found an ingenious way to keep an ageing machine running years beyond its expected life. Such stories represent a quality that Indians celebrate instinctively: jugaad.


Symbol of Ingenuity

Over time, jugaad has become more than a word. It has become a symbol of Indian ingenuity. Business schools discuss it. Innovation experts analyse it. Entrepreneurs cite it as evidence that constraints can stimulate creativity. In a world increasingly concerned with sustainability and affordability, jugaad is often presented as a uniquely Indian contribution to innovation. Yet an important question remains largely unexplored: Can a nation become a scientific and technological leader by relying on jugaad?


The answer is both yes and no. Jugaad is one of India’s greatest strengths. But if misunderstood, it can also become one of its greatest limitations.


The word itself carries two very different meanings. At its best, jugaad represents resourcefulness under constraints. It is the ability to solve problems when money, materials, infrastructure or institutional support are scarce. It reflects creativity, resilience and determination. Many grassroots innovations that have improved lives across India emerged from precisely this spirit. At its worst, however, jugaad becomes a shortcut. It becomes a way of bypassing systems rather than improving them. It becomes an acceptance of temporary fixes instead of pursuing durable solutions. The same word therefore deserves both admiration and caution.


For much of the post-Independence period, India functioned in an economy marked by shortages. Products were difficult to obtain. Imports were restricted. Capital was limited. Infrastructure was inadequate. Citizens and businesses often had little choice but to improvise.


This should not be mistaken for an inherent Indian preference for improvisation. India has a long tradition of systematic engineering. The planned cities and drainage systems of the Indus Valley Civilization, the Iron Pillar of Delhi that has resisted corrosion for over 1,600 years, the intricate water-management systems of stepwells and tanks, and the great temples, forts and observatories built across the subcontinent all testify to a deep engineering tradition. These achievements were not products of jugaad. They were the result of careful design, accumulated knowledge, standardization and skilled execution. In many ways, they remind us that India’s civilizational strength has never been improvisation alone. It has been the ability to transform knowledge into systems that endure for centuries.


This capacity to do more with less should not be underestimated. It has helped millions overcome obstacles and has often generated surprisingly effective solutions. It has enabled innovation to emerge not only from laboratories and corporations but also from workshops, farms and small enterprises.


Frugal Innovation

Indeed, some of India’s most admired achievements embody the spirit of achieving more with fewer resources. The success of affordable healthcare models, low-cost medical technologies and cost-effective space missions demonstrates that frugality and excellence can coexist. This distinction is crucial. Frugal innovation and world-class innovation are not opposite.


The Jaipur Foot restored mobility to millions at a fraction of the cost of conventional alternatives. The Aravind Eye Care system demonstrated how high-quality healthcare can be delivered efficiently and on a scale. ISRO earned international respect not because its missions were inexpensive, but because it consistently achieved demanding objectives within limited budgets. These examples are not celebrated because they are cheap. They are celebrated because they combine affordability with reliability, quality and impact. More recently, digital public infrastructure such as UPI has demonstrated how India can create solutions that are not only affordable but also robust enough to serve hundreds of millions of users. Such achievements represent the evolution of ingenuity into systems.


The real challenge begins when jugaad is mistaken for a complete innovation strategy. There is an important difference between solving a problem and solving it reliably, safely and on a scale. A makeshift repair may keep a machine running for a few days. An engineered solution may keep it running for decades. A local workaround may help one community. Robust technology can serve millions. One demonstrates ingenuity. The other creates enduring value.


This distinction becomes even more important in science and technology. Scientific progress depends on reproducibility. An experiment must yield the same result when repeated under the same conditions. Engineering depends on standards, testing, documentation and quality assurance. These disciplines were developed precisely to reduce dependence on improvisation. In many ways, science advances by replacing clever exceptions with reliable rules.


A vaccine cannot be approved through jugaad. A commercial aircraft cannot fly safely through jugaad. A semiconductor fabrication facility cannot operate through jugaad. A nuclear power plant cannot depend on jugaad. Such systems demand precision, predictability and reliability. Jugaad proves that something can work. Engineering ensures that it works every time.


History offers valuable lessons. Japan emerged from the devastation of the Second World War to become synonymous with quality and precision. Germany built its industrial strength through rigorous engineering standards. South Korea transformed itself from a developing nation into a global technology leader through sustained investments in research, manufacturing excellence and innovation ecosystems. These countries certainly displayed creativity and adaptability. But they converted creativity into capability. That transition is where India now stands.


India’s aspirations are no longer limited to overcoming scarcity. The country seeks leadership in artificial intelligence, quantum technologies, advanced materials, biotechnology, semiconductors, aerospace systems and clean energy. Through the vision of Viksit Bharat 2047, it seeks not merely economic growth but technological leadership. These ambitions require more than ingenuity. They require institutions.


One of the unintended consequences of excessive admiration for jugaad is that it can normalize systemic deficiencies. Instead of asking why a problem exists, we celebrate our ability to work around it. India has often displayed extraordinary skill in solving problems despite imperfect systems. The next stage of development requires building systems that solve problems without heroic effort. This may be the central challenge of India’s innovation journey.


Building Institutions

The lesson is not that India should abandon jugaad. On the contrary, the creativity, flexibility and entrepreneurial spirit that jugaad represents are invaluable assets. The challenge is to ensure that jugaad remains the beginning of the innovation process rather than its endpoint. The question is whether we can build institutions that repeatedly produce such solutions on a global scale.


This requires investments in research, engineering education, testing facilities, standards, manufacturing excellence and innovation ecosystems. It requires universities, laboratories, startups, industries and government agencies to work together over long periods. Most importantly, it requires a culture that values not only invention but also refinement, reliability and scale.


Jugaad helped India navigate an era of scarcity. The task before India now is to build the institutions that make it work every time. That is the true journey from jugaad to engineering. It is also the journey from a developing India to a developed one.


(The writer is an ANRF Prime Minister Professor at COEP Technological University, Pune, and former Director of the Agharkar Research Institute, Pune. Views personal.)

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