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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

Trial By Fire

Writer: Abhijit Mulye
Abhijit Mulye
Nov 11, 2024
2 min read

Updated: Nov 12, 2024

Chandrashekhar Bawankule

Maharashtra BJP President Chandrashekhar Bawankule’s meteoric rise in the state politics is a mesmerising story of the success of democratic process and how even a common man can make to the top in a democracy.


Chandrashekhar Krishnarao Bawankule, born on January 13, 1969, in Koradi near Nagpur had completed his graduation in Science, but had no means to run the family and hence had started running auto-rickshaw on the Koradi-Nagpur road. He has a natural knack to connect with the people and this very skills carved a labour leader out of him. He use to chit chat with the labourers he use to ferry to and from the Koradi thermal power station which made him aware of their real issues and the exploitation they were facing. He built their union and fought for their rights.


Bawankule’s political journey began in the early 1990s when he founded the “Chhatrapati Sena,” a social organization aimed at addressing local issues. His dedication to social work caught the attention of senior BJP leaders, and in 1995, he joined the Bharatiya Janata Party under the mentorship of Gopinath Munde and Nitin Gadkari. He quickly rose through the ranks, becoming the Vice President of the Bharatiya Janata Yuva Morcha, the youth wing of the BJP in Maharashtra.


In 2004, Bawankule was elected to the Maharashtra Legislative Assembly from the Kamthi constituency defeating senior Congress leader Mukul Wasnik. The party had no good face to field from the constituency and was considering it as a lost seat and hence Bawankule was fielded from the constituency. However, his victory came as a pleasant surprise for the party and it raised his stature within the party. He successfully retained his seat in the subsequent elections in 2009 and 2014. His tenure as an MLA was marked by his focus on development and infrastructure projects in his constituency


Born into a Marathi Teli family Chandrashekhar Bawankule grew up in a farming family with no prior political background. His political acumen and leadership skills earned him several key ministerial positions in the Maharashtra government. From 2014 to 2019, he served as the Minister for Energy, New and Renewable Energy. During his tenure, he was instrumental in implementing various energy projects and reforms aimed at improving the state’s power infrastructure.


In 2019 assembly election he was denied party ticket owing to come corruption charges. However, later he was sent to legislative council and in August 2022, Chandrashekhar Bawankule was appointed as the President of the state BJP.


As the state president of the BJP Bawankule has a herculean task to deliver a desirable result for the party on the backdrop of its under performance in the Lok Sabha elections. If he could deliver his status in the party would rise. A failure will confine him to Nagpur only.

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