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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

NDA power matrix reshaped after success

Writer: Abhijit Mulye
Abhijit Mulye
Jun 21
3 min read
AI generated image
AI generated image

Mumbai: A quiet coup in the state has triggered a loud shift in the power dynamics of the nation’s capital. By engineering the defection of six additional MPs, Deputy Chief Minister Eknath Shinde has nearly doubled his parliamentary muscle, transforming his Shiv Sena faction from a junior regional partner into an indispensable pillar of the NDA.


Now sitting on a commanding 13 seats, Shinde has dramatically increased his political leverage—leaving a cautious BJP to weigh the cost of an emboldened ally demanding a bigger slice of the pie in both the Union and state cabinets.


In a masterstroke of political engineering that has profoundly jolted political landscape, Shinde has once again demonstrated his formidable capacity for disruption. The rebellion of six out of nine Lok Sabha Members of Parliament from the Uddhav Thackeray-led Shiv Sena (UBT), ostensibly joining Shinde’s ranks under the banner of “Operation Tiger,” is not merely a regional skirmish. It is a calculated power play that reverberates through the highest corridors of power in New Delhi. By nearly doubling his party’s strength in the lower house from seven to thirteen MPs, Shinde has dramatically altered his own political trajectory, elevating his faction from a helpful regional ally to an indispensable pillar of the National Democratic Alliance (NDA).


Shinde’s Stature

The immediate consequence of this crossover is a massive surge in Shinde’s stature within the NDA hierarchy. With thirteen parliamentarians, his Shiv Sena is now poised to become the fourth-largest bloc in the ruling national coalition, sitting just behind the Bharatiya Janata Party, the Telugu Desam Party, and the newly formed Nationalist Citizens Party of India. This numerical leap is of immense strategic value to the BJP-led central government.


In a parliamentary environment where the ruling coalition possesses only a modest majority, every single seat counts. The central leadership is acutely aware of upcoming legislative hurdles, particularly ambitious constitutional amendments like the proposed delimitation bill, which will require a formidable two-thirds majority. By acting as the architect of this crucial numerical boost, Shinde has cemented his reputation as a reliable and highly effective operator for the NDA, significantly increasing his bargaining power and political leverage.


National Relief

For the BJP, this development evokes a complex mixture of profound national relief and acute regional anxiety. From the vantage point of PM Narendra Modi and Union Home Minister Amit Shah, Shinde’s successful poaching operation is a clear windfall. It simultaneously fortifies the NDA’s numerical strength in New Delhi while severely crippling a vocal opposition force in Maharashtra. The central BJP leadership views Shinde as a vital asset capable of bridging the gap between their current numbers and the overwhelming mandates of the past.


However, the perspective from the Maharashtra BJP headquarters is noticeably more apprehensive. State BJP leaders openly acknowledge Shinde’s soaring political equity, but they are increasingly wary of his expanding ambitions. They recognize that an emboldened Shinde, eager to fill the political vacuum left by Uddhav Thackeray and a fragmented Nationalist Congress Party, will aggressively attempt to expand his footprint across the state, potentially encroaching upon the BJP’s own traditional support bases.


Power Sharing

This dramatically enhanced political heft immediately raises pressing questions regarding power-sharing arrangements, both at the Centre and in the state. Armed with thirteen MPs, Shinde’s camp is undoubtedly preparing to seek greater political rewards. In the Union Cabinet, his demand for an additional, high-profile ministerial berth is now backed by solid arithmetic. Given his heightened utility to the national coalition, the BJP high command is highly likely to accommodate this request during the next cabinet reshuffle.


However, the power struggle within the Maharashtra state cabinet promises to be far more contentious. Shinde, who had to settle for the Deputy Chief Ministership behind Devendra Fadnavis following the last assembly elections, may now feel emboldened to petition the BJP leadership for the top job. The BJP’s state unit is actively preparing to fiercely resist any such demand. Senior BJP leaders are quick to emphasize that despite his parliamentary gains, Shinde’s legislative strength in the state assembly hovers around 57 MLAs, dwarfed by the BJP’s commanding 132 legislators. Consequently, conceding the Chief Minister’s chair remains highly improbable. Instead, the BJP will be forced into a delicate balancing act, likely appeasing Shinde by granting his faction a larger share of influential, heavyweight portfolios within the state government to keep the alliance stable. Ultimately, through sheer political audacity, Eknath Shinde has ensured that neither New Delhi nor Mumbai can afford to govern without catering to his increasingly formidable political weight.

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