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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

India’s Toxic Work Culture: A Silent Mental Health Crisis

Sep 21, 2024
4 min read

Updated: Oct 21, 2024

India’s Toxic Work Culture: A Silent Mental Health Crisis

In the middle of a particularly busy workday, earlier this week, a friend sent me a WhatsApp forward which I grudgingly opened. It was a news report announcing that a 26-year-old chartered accountant working with a leading consultancy firm in India had died. Her mother accused the organisation of “stress” over the past six months that could have led to her daughter’s death. Can mental stress cause death? I am not sure. But then, I do not have the medical credentials to attest or dispute that claim. What I am convinced about is that prolonged stress can—and does—lead to various ailments and as we know by now, most diseases originate in the mind!

I have seen the impact of ‘toxic workplaces’ on my colleagues in a different organization: a young lifestyle writer developed stomach ulcers after suffering ‘intense mental stress’ for three years at the hands of a very difficult, demanding and nasty boss. A young photographer had a mental breakdown after having a raise pulse rate each morning as she walked in through the office door and into the newsroom. What did they do? Complaints to the management were brushed aside because the question was “how could long stressful hours lead to hospital visits?”

Work pressures have, indeed, increased over the years with greater competition to keep the top job, or rather, the job you have in hand. It is only in recent years that people have started recognising the impact of workplace stress on mental health.

There are studies that corroborate this. And conversations revolving around mental health are more open and prevalent. A survey done by Deloitte this year revealed that a staggering 80 per cent of the Indian workforce reported experienced mental health issues in the past year. Another study by the National Sample Survey Office found that over 60 percent of Indian employees grapple with stress at work. The World Health Organization’s data shows how pervasive the concern is - it says that nearly one in four employees in India suffer from work-related stress.

The notorious ‘burnout’ is happening much sooner. High achieving professionals in their early 30s grapple with exhaustion and fatigue. The nature of the stress differs across geographic and demographic variations. If corporate offices exert pressure to meet deadlines, job insecurity is a factor in low paying, less skilled jobs. No matter what you do, you cannot escape stress if you work in India.

On a visit to Vienna a few years ago, I was fascinated by their 35-hours-per-week work rules. At 6 p.m., it was common to see people sauntering into cafes with their dogs to have coffee with friends; the parks were bustling at 5 p.m. And these were not retired seniors, they were all working professionals who knew when to cut off from work. India does not appreciate a work-life balance. Long hours at the desk have been glorified and hailed as ‘professionalism.’ Working weekends add to the scores during appraisals and going incommunicado post work for a family dinner or movie is a mark of ‘not being serious enough.’

This cultural shift began two decades ago, as multinationals brought with them an American work culture of rushed breakfasts, heart-pounding deadlines and the belief that longer hours equal greater achievement and therefore, fatter paychecks. What has been overlooked is that a burnt-out workforce cannot deliver results.

India’s burgeoning population means there are several contenders for the same skilled jobs leading to cut throat competition at various levels of the workforce. People in ‘private companies’—or non-government organisations—are dispensable. A hospitalised employee can very well find his job changing hands; a new mother raises her infant while worrying about keeping her job.

Round-the-clock connectivity comes at a huge personal and mental health price. Late night discussions on WhatsApp chats and dreaded emails at 4 A.M. disrupt sleep and peace. The pandemic and the work from home culture it started also has its share of blame. A senior manager at an OTT major complained that there is no cut off time when he works from home. Mornings and nights are the same as mid-day. Mental health experts tell you that disconnecting and focussing on other activities helps the mind de-stress.

Rising stress, often silent and unspoken, is a looming crisis. Few seek help, assuming it is temporary, but the toll on health, families, relationships, and productivity is severe.

Organisations lose work hours to absence caused by mental ill-health; productivity suffers even if the employee is physically at-work. Family and social relationships are taking a downturn and personal mental health is the biggest sufferer.

The change lies in new policies. In 2019, Member of Parliament Supriya Sule introduced a Private Members’ Bill called the ‘Right to Disconnect’ under which employees can refuse work outside of reasonable work hours. Australia offers employees protection from professional exploitation through a similar law where people can refuse to work outside their stipulated hours.

India Inc. is gradually waking up to the new demands for mental healthcare with counselling sessions, wellness care leave, childcare facilities and flexible work arrangements. But the implementation should be in spirit and not only on paper. Government policies such as the right to disconnect will further boost people’s ability to refuse after-hours work. Mental healthcare should not remain just lip service or a one-off human care initiative. Workplaces should be turned into safe havens, both, physically and mentally.

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