EPFO Wage Cap May Be Raised Beyond Rs 15,000 — What Does It Mean For You?

A long-pending proposal to raise the wage ceiling under the Employees Provident Fund Organisation is back in focus. The government is reconsidering an increase from the current Rs 15,000 a month to a range of Rs 25,000-Rs 30,000. If implemented, the move could significantly widen the social security net by bringing millions of additional workers under mandatory provident fund coverage.

The wage ceiling determines the salary threshold up to which employees, in establishments covered under EPFO, must contribute to the retirement fund. At the current cap it is not mandatory for employers and employees earning above Rs 15,000 to contribute to the social security organisation. Those earning above the cap can join voluntarily.

The existing limit, set in September 2014, has remained unchanged for over a decade despite steady growth in wages across sectors.

Since 2014, salary structures have significantly evolved. In several states, even minimum monthly wages for unskilled workers now exceed Rs 15,000, leaving a large section of low-income and minimum-wage earners outside mandatory EPFO coverage. Employee unions have long argued that the outdated ceiling has weakened social security protection, pushing for a higher threshold of up to Rs 30,000.

The proposal had earlier been discussed by the government but was shelved due to resistance from employers, many of whom argued that a higher wage cap would raise compliance costs unless accompanied by a reduction in contribution rates.

The issue regained urgency earlier this week after the Supreme Court asked the labour ministry to review the wage ceiling within four months. Officials say the review will consider current wage realities, inflation and the need to expand formal social security coverage.

The renewed discussion comes alongside the notification of the new labour codes, which are expected to be implemented in the coming months.

The codes emphasise clearer wage definitions, mandating that basic wages account for at least 50% of total remuneration, with the rest paid as allowances. Officials believe this clarity will reduce disputes over EPFO eligibility and contribution calculations.

The move also aligns with recent EPFO reforms, including a mandate to maintain at least 25% of the corpus even as withdrawal rules have been eased.

As of FY24, EPFO had nearly 7.4 crore active contributing members, with around 32 crore member accounts in total, including past contributors. A higher wage ceiling could push these numbers up further, marking a significant expansion of India’s formal social security framework.