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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

Govt has done a lot for Marathas, says Sreejaya

Writer: Rishabh Mishra
Rishabh Mishra
Oct 25, 2024
2 min read
Sreejaya

Chhatrapati Sambhajinagar: Sreejaya, daughter of BJP MP Ashok Chavan and party’s nominee from Maharashtra’s Bhokar assembly seat, has said the opposition’s “false propaganda” will not work this time and asserted the government has done a lot to address issued faced by Marathas.


Sreejaya Chavan, who was earlier in the Congress and shifted her political loyalty to the Bharatiya Janata Party (BJP) when her father, a former CM, joined the saffron outfit in February this year, was among 99 candidates named by the party in its first list for the November 20 state assembly polls.


A law degree holder, Sreejaya is making her electoral debut from the home turf of Bhokar in Nanded district.a


In an interview with PTI, she said her campaign team is cautioning voters about the “false propaganda” spread by the opposition during the recent Lok Sabha elections, which saw the BJP putting up an underwhelming performance and winning just nine seats in Maharashtra.


The ruling Mahayuti has done a lot to address the issues faced by the Maratha community, which is agitating for reservation in jobs and education, she noted.


She also touched upon the emotive issue of Maratha reservation which is widely believed to have contributed in the BJP’s poor showing in the Lok Sabha polls, especially in Marathwada, the ground zero of the quota stir spearheaded by Manoj Jarange-Patil.


“We are telling people in villages about the false propaganda unleased by the opposition during the Lok Sabha polls. So many issues were raised against certain sections of society. People are intelligent enough, and they understand these propagandas will not work anymore,” she said when asked about campaign issues and what her team is doing to avoid a repeat of loss in the Lok Sabha polls.


“The Mahayuti government has given a 10 per cent reservation to the Maratha community (in government jobs and education). Many youths from Bhokar have already benefitted with provisions made for Socially and Economically Backward Classes (SEBC) by the government,” Sreejaya Chavan insisted.


She dwelt on her political journey from the Congress to the BJP and her new role as the saffron party’s candidate from Bhokar.


“Our family has been working for long for the people in the constituency. After the switch over, ideological and thought process may differ a little bit, but we have always given preference to the people in our constituency. I am giving time to address demands of people in both rural and urban areas,” she maintained.

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