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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

What could be Jayant Patil’s bigger role?

Writer: Aditi Pai
Aditi Pai
Oct 19, 2024
2 min read

Updated: Oct 22, 2024

Sharad Pawar’s hint at a bigger role for Jayant Patil has led to murmurs of discontent within the MVA

Jayant Patil

Mumbai: Supriya Sule or Jayant Patil—that’s the question buzzing within the NCP(SP). On Wednesday, Sharad Pawar made a statement that was loaded with a message that has got his allies thinking. At a party rally at Islampur in Sangli district, Pawar heaped praises on Jayant Patil’s leadership qualities and stated that Patil should shoulder the responsibility of steering the state in the right direction.


It was seen as a hint that Patil might be considered for the post of the chief minister of Maharashtra if the MVA wins the elections. So, was Pawar alluding to the possibility of Patil being projected as the chief ministerial face of the MVA?


For long, there have been whispers of Sule being given the state’s top job by her party, making her the first woman chief minister of Maharashtra. There has never been a formal statement on the issue though. Political watchers say that, as usual, the statement is nothing more that a “googly” that the shrewd politician is known to hurl at his allies and opponents alike.


Projecting Patil as the man who would shoulder greater responsibilities was a smart move especially since the statement came at a public meeting in Patil’s home turf, Islampur where the family enjoys clout and influence.


Patil’s father Rajarambapu was a force to reckon with in the region and besides being a cabinet minister, set up several cooperative bodies and educational institutes that have worked towards the socio-economic development of Sangli and Islampur, in particular.


Patil has been an able successor who has led these institutes and cooperative factories and banks. Cooperative bodies are a targeted voter base for political parties, a factor that the Congress and NCP have banked on, for years. A member of the NCP-SP who did not want to be named says: “We are appealing to the members of these cooperative bodies who have been our voters for long but not they’ve also been divided after the split in the party.” Harshvardhan Patil’s re-induction into the party after a stint with the BJP is also believed to be for gaining a hold over members of various cooperative bodies that he holds sway over.


Some say that Pawar’s statement could be only to unnerve the other alliance partners especially the Shiv Sena which has been openly talking about projecting Uddhav Thackeray as the CM face of the MVA.


Despite murmurs that he may cross over to the BJP, Patil has stayed loyal to the NCP-SP even in the face of great turmoil when Ajit Pawar quit, taking along several legislators. When some, in private, assured the NCP supremo that their departure was only to absolve themselves of various cases slapped on them by investigation agencies, Patil stayed with the party even in the face of an inquiry by the Enforcement Directorate in an alleged money laundering matter. Pawar’s public appreciation of Patil could be a double-sided sword—in acknowledgment of his loyalty and support and a tug at the heartstrings of the people of Islampur.

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