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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

From Independence to Exploitation: India’s 78-Year Journey

Writer: Kumar Nilendu
Kumar Nilendu
Aug 21, 2024
3 min read

Updated: Oct 21, 2024

From Independence to Exploitation: India’s 78-Year Journey

The conclusion of the 16th Loksabha Election was aptly termed the Rockefeller Moment for Corporate India. The real economic power shifted towards crony capitalists or oligarchs, with influence now flowing from the Corporate Club 2.0.

Just as how Sita was kidnapped by Ravana, democracy has been hijacked by Crony Corporations replacing Corporatalism with Corporate terrorism’. This fusion of corporates with governance has led to ‘fascism’ in India, obliterating democratic processes.

The contract-labour system, emerging from this power shift, has enriched the political apparatus with lucrative labour contracts, while fostering a harmful industrial-silence, across the industries in India. Contract labour is exploited like disposable tissue and remains silenced. This system and outsourcing have helped keep wages low and created instability and insecurity among the working class.

The contract-labour system has unleashed new forms of slavery and neo-untouchability pushing a large portion of the working class to the periphery of the development. This process has led to ‘socio-economic exclusion which is harmful to the environment, fitting Nobel laureate Amartya Sen’s description of India, as, islands of California, in a sea of Sub-Saharan Africa.’

We have succumbed to exploiting human weakness rather than building on human strength, turning civilization backward. The law of the jungle, where might is right, now prevails, with the powerful thriving while the weak are pushed aside.

Corporations compete by exploiting employees, hiding their inefficiencies, insatiable greed, and corrupt practices. Now, it is hard to find price wars in the open-market competition, and the real-time competition is in exploitative measures and marketing gimmicks. The contract-labour system and outsourcing are the newfound tools, in the hands of corporate sharks, with widespread collusion with corporates, politicians, the judiciary, and the labour department.

Directive Principles of State Policy (DPSP), which focuses on promoting and protecting the downtrodden’s economic interests, have been compromised through a criminal conspiracy between the political and capitalist domains of our country. Corrosive effects of malevolent and ominous corporate influence on public policy, political processes, and especially, the environment are glaringly open to anybody’s scrutiny, who is still left with some remnants of sensitivity.

Not only the working class belonging to this generation, but the future generations, are susceptible to the severest of risks, and the carcinogenic effect of this exploitative technique. The long-term potential implications are beyond blue-collar and white-collar employees in India, if not for the world.

Inequality has been sharply rising since 2014. As per the recent Oxfam report, the top 1% In India holds more than 40% of wealth, creating a Billionaire Raj.

Developed countries like Japan or Korea hardly have the kind of blood-billionaires India has solely because the inheritance ends almost after the fourth generation, owing to the progressive and coercive rates of inheritance tax!

We are now entering the 78th year of independent India, when we can ask ourselves whether the soul of a nation, long suppressed has found utterance or whether we have been able to fulfill a pledge to bring freedom and opportunity to the peasants and workers—who are the real wealth-creators of our nation?

India has been able to create unparalleled wealth within a few decades. But the distribution of this wealth has been totally lopsided and grossly uneven. This has given rise to the inhuman income disparity or inequality across our country, spawning a fleet of blood -billionaires.

The workers and farmers of India were promised a trickle-down theory, once the enormous wealth through the LPG Policy (Liberalisation, Privatisation, and Globalisation) could have happened. A promise that was never fulfilled. Instead, workers were handed out neo-slavery and neo-untouchability through the rampant spread of the contract-labour system.

So independence has not reached the lowermost strata of society, i.e. working class, or if at all, it had ever reached; it has been snatched away after the advent of the LPG era by the present-day Vampire-State System!

The writer is labour union leader. Views personal

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