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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

Mayor by Lottery

Writer: Abhijit Joshi
Abhijit Joshi
Jan 24
4 min read

Maharashtra’s reservation draw has turned municipal politics into a high-stakes game, reshaping power at the grassroots.

The draw of lots for reservation of mayoral posts in Maharashtra’s municipal corporations, conducted this week has once again brought the spotlight on the importance of reservation in local self-government.


What appears on the surface as a routine administrative exercise has set off intense political activity across cities, especially in Mumbai and major urban centres like Kalyan-Dombivli, revealing how deeply reservation shapes power and political strategy at the grassroots level.


Municipal corporations are the closest tier of governance to citizens. Decisions taken here directly affect everyday life. The mayor, though largely ceremonial in some aspects, remains a powerful political symbol and a crucial coordinating authority. The reservation of these posts, therefore, is not merely about who gets the chair; it is about who gets a voice in shaping urban priorities.


Inclusive Democracy

Reservation in municipal bodies is rooted in the idea of inclusive democracy. For decades after Independence, urban local governance remained dominated by a narrow social and political elite. Women, Scheduled Castes (SC), Scheduled Tribes (ST), and Other Backward Classes (OBC) were under-represented, despite forming a large share of the urban population. The constitutional mandate for reservation, strengthened through decentralisation reforms, aims to correct this imbalance. By reserving leadership positions, the system ensures that decision-making spaces are periodically opened to sections of society that historically had little access to power.


This is a deliberate effort to widen participation, nurture leadership from the margins, and make governance more responsive to diverse urban realities. Reservation also compels political parties to invest in leadership development beyond their traditional comfort zones. Parties cannot rely only on familiar faces; they must identify, promote, and support leaders from reserved categories. In theory, this strengthens democracy. In practice, it also makes politics more competitive and unpredictable.


The reservation draw held this week decided the category under which mayoral posts in Maharashtra’s municipal corporations will be filled for the upcoming term. Once the categories were announced, political equations shifted almost overnight. Mumbai, the country’s financial capital, remains the most coveted prize.


Control of the Brihanmumbai Municipal Corporation (BMC) has long been a marker of political dominance in Maharashtra. With the mayor’s post falling under reservation, parties have had to recalibrate their strategies, alliances, and candidate selections. For the ruling alliance, particularly the Shiv Sena (Eknath Shinde faction), the reservation draw is a critical opportunity. Since the party split, the Shinde-led Sena has been keen to demonstrate its organisational strength in urban bodies, especially in Mumbai, where the original Shiv Sena built its political legacy.


The Bharatiya Janata Party, despite being numerically strong in several corporations, must also operate within the constraints imposed by reservation. Numbers alone do not guarantee power when the eligibility to contest a post is category-specific. As a result, negotiations, support arrangements, and tactical adjustments become inevitable. Perhaps the most striking example of reservation’s political impact is visible in Kalyan-Dombivli. Here, the mayor’s post has been reserved for a Scheduled Tribe candidate. This single administrative decision has reshaped political behaviour. The Shinde-led Shiv Sena has chosen to extend support to the Maharashtra Navnirman Sena (MNS), a party it has historically opposed. The alliance is politically awkward but strategically necessary. Reservation, in this case, has overridden ideological rivalry. Such developments underline an important truth: reservation does not weaken democracy; it exposes its real dynamics. It forces parties to adapt, negotiate, and sometimes compromise, often in ways that would not occur in an unreserved system.


High Stakes

In Mumbai, the stakes are especially high. The mayoralty carries enormous symbolic weight. It represents control over India’s richest municipal body and sends a powerful political message across the state. With the reservation outcome now clear, political parties are actively lobbying corporators, reassessing alliances, and positioning candidates who fit both the reservation criteria and internal power equations.


These manoeuvres are not just about winning a post; they are about establishing legitimacy, visibility, and momentum ahead of future state and national elections. Opposition parties, too, view reservation as both a challenge and an opportunity.


While it may limit the pool of eligible candidates, it also allows newer leaders, especially women and those from marginalised communities, to emerge as consensus figures. For citizens, the reservation debate may appear distant from daily concerns. But its impact is real. Leaders from different social backgrounds often bring different priorities to governance. Issues such as affordable housing, basic services in informal settlements, women’s safety, and access to healthcare tend to receive greater attention when leadership reflects lived experience.


Reservation also normalises diversity in leadership. When citizens repeatedly see women, SC, ST, and OBC leaders occupying visible positions of authority, it reshapes public expectations about who can govern. Over time, this cultural shift may be as important as policy outcomes. Critics argue that reservation sometimes leads to political opportunism or proxy leadership. These concerns are not unfounded. However, they point to the need for stronger internal democracy within parties and not the dismantling of reservation itself.


The events following the draw demonstrate that reservation is a powerful democratic tool that tests the maturity of political parties. Those that treat it merely as an obstacle to be navigated miss its larger purpose.


Those that invest in genuine leadership development stand to gain long-term credibility. As Maharashtra prepares for a crucial phase of municipal governance, the current churn offers an important reminder: democracy does not function only through elections. It also depends on the rules that shape representation and on how political actors respond to them. In that sense, the reservation of mayoral posts is not just about who wears the chain of office. It is about who gets to shape the future of India’s cities.


(The writer is a political observer. Views personal.)

 
 
 

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