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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

Raj Thackeray’s Political Dance

Writer: Kiran D. Tare
Kiran D. Tare
Oct 23, 2024
2 min read
Raj Thackeray

With Maharashtra’s Assembly elections looming, a political shuffle is taking shape in Mumbai. At a high-profile meeting held in a five-star Mumbai hotel on Monday, Chief Minister Eknath Shinde and Deputy Chief Minister Devendra Fadnavis reportedly held a closed-door discussion with Maharashtra Navnirman Sena (MNS) chief Raj Thackeray, reportedly over seat-sharing arrangements in key constituencies like Shivdi, Worli and Mahim.


Despite unconditionally backing the Mahayuti in the Lok Sabha election, Raj had recently announced the MNS would contest the Assembly election on its own. However, there appears to be a tacit understanding that the Mahayuti parties, especially the Shiv Sena led by chief minister Eknath Shinde and the BJP, would be strategically backing the MNS candidates in key Mumbai seats to defeat the rival Shiv Sena (UBT) led by Uddhav Thackeray, Raj’s estranged cousin.


Raj’s son, Amit Thackeray, is expected to make his political debut in Mahim, a constituency contested by MNS leader Nitin Sardesai in the past. One of Mahim’s neighbouring constituencies is Worli, where Uddhav’s son, Aaditya Thackeray, is expected to defend his seat. In September, Raj had held a rally in Worli, where he tried to rouse nativist sentiments by calling on the ‘sons of the soil’ to stand up for their fundamental rights.The rally had coincided with the unveiling of the MNS’s ‘Vision Worli’ a strategic move to ostensibly counter Aaditya Thackeray’s programme.


By supporting Raj indirectly, the Mahayuti hopes (as it always has) to use MNS as a tool to split the Marathi vote and weaken Uddhav’s Shiv Sena (UBT). 


Despite the MNS not having a single MLA or MP across Maharashtra, the BJP has always hoped to make use of Raj’s still extant Marathi-speaking vote-bank not just in Mumbai, but in Thane and Nashik to challenge the Sena (UBT) in wake of Muslim, Christian and Dalit voters gravitating towards Uddhav Thackeray since the latter’s alliance with the Congress and Sharad Pawar.


The MNS’ twin debacles in the 2014 parliamentary and Assembly elections left the party in utter disarray, with the slide continuing through the 2017 civic election as well as the 2019 State and national elections. Following its rout in the 2019 Assembly election, an atrophied MNS had changed its ideological direction from its nativist stance by veering towards Hindutva politics.


The MNS’ about-turns have compounded its woes. In 2014, Raj endorsed Prime Minister Modi, only to campaign fervently against him in the 2019 general elections, aligning himself with the NCP. Ahead of the Lok Sabha, he returned to giving unconditional support to Modi by campaigning for the Mahayuti. His constant political oscillations have caused confusion within his ranks.


That said, for Shinde and the BJP, having a Thackeray on their side, even tacitly, offers a symbolic boost in their battle with Uddhav for the supremacy of Mumbai.

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