top of page

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

MNS: Steamless engine in yard

Quaid Najmi
Mar 20
2 min read

Mumbai: When Swararaj Shrikant Thackeray, or Raj, launched the Maharashtra Navnirman Sena (MNS) with fanfare 20 years ago, there was widespread optimism that his ‘steam engine’ symbol would travel far in politics, trigger realignments and perhaps emerge as a viable alternative in Maharashtra.


Raj’s dramatic break from his illustrious mentor and uncle, the late Shiv Sena founder Balasaheb Keshav Thackeray, and a split from cousin Uddhav Thackeray created more than ripples — it unleashed a wave of expectations. After all, compared with the soft-spoken Uddhav, he was a firebrand orator with a sharp political instinct.


Two decades on, the MNS is jostling for relevance - much like a commuter trying to board an overcrowded local at Dadar - in a formidable, competitive and unforgiving political landscape. The ‘steam engine’, barely having had a steamy roll, has lost much of its early sting.


Political ‘siding’

Albeit marginalised but still counted as relevant, Raj, now 57, is attempting a reset of goals - his recent speeches at Raigad Fort and in Mumbai signal an effort to craft a fresh political blueprint.


The first signs of this emerged in mid-2025, when Raj and Uddhav buried the hatchet after over two decades of estrangement. The Thackeray cousins joined hands for the January 2026 Brihanmumbai Municipal Corporation (BMC) elections.


Yet, as debates continue over who really gained from the alliance, the outcome was clear: the Maha Vikas Aghadi (MVA) ceded ground to the Bharatiya Janata Party-led Mahayuti, which captured the BMC - ending the nearly three-decade-long Shiv Sena rule over the civic body.


Undeterred, Raj is building up the MNS and readying to embrace a changed political and social landscape, where a new generation of voters - Gen Z and even Gen Alpha - shape electoral outcomes, driven by aspirations and ambitions.


‘Twenty years ago, when the Marathi voice was fading, the MNS sparked an awakening through agitations and elections,’ Raj said last week, reminding how the party championed regional identity.


Poor Record

Nevertheless, the MNS’ electoral record highlights its shrinking political fortunes - it peaked in the 2009 Assembly elections, when it won 13 of 288 seats. Thereafter, the slide was steep and consistent - no seats in 2014, a solitary MLA in 2019, and virtual insignificance by 2024. The MNS has never won a Lok Sabha seat.


Several factors were responsible for this - Raj’s perceived ideological inconsistency; his pro- and anti-BJP political ding-dongs blurred the party’s identity; its core plank overlapped with that of the Shiv Sena, limiting options for supporters. His aggressive rhetoric, particularly targeting North Indians in earlier years and later Muslims, alienated potential allies and voters, while a missing organisational structure beyond a few urban pockets in Mumbai, Pune and Nashik left the party stunted.

Comments

bottom of page