The Union Cabinet, chaired by the Prime Minister Narendra Modi, approved the proposal of the Ministry of Labour & Employment to raise the wage ceiling for mandatory coverage under the Employees' Provident Fund Organisation (EPFO) from Rs 15,000 to Rs 25,000 per month.
The decision is expected to bring more than 51 lakh additional employees within the ambit of mandatory EPFO coverage, significantly expanding access to provident fund savings and pension protection under the Employees' Pension Scheme (EPS).
It could also significantly increase the life insurance cover available to eligible EPFO members under the Employees' Deposit Linked Insurance (EDLI) scheme. But could your Rs 7 lakh insurance cover rise to Rs 10.5 Lakh? Let's find out.
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Here's A Look At How EDLI Is Calculated
Under the current rule, EDLI provides a maximum benefit of Rs 7 lakh to eligible users. This is calculated using the user's monthly salary over the last 12 months, based on their applicable wage ceiling along with a component tied to the average EPF balance.
Currently, the maximum benefit is calculated as: (Rs 15,000 × 35) + Rs 1.75 lakh = Rs 7 lakh
If the wage ceiling is increased to Rs 25,000, the total benefit would be: (Rs 25,000 × 35) + Rs 1.75 lakh = Rs 10.5 lakh
This means the EDLI cover for eligible users could rise from Rs 7 lakh to Rs 10.5 lakh, provided the government revises the wage ceiling used to calculate the insurance benefit while retaining the existing Rs 1.75 lakh cap on the EPF-balance component.
The Rs 1.75 lakh component here is also important. If the government also increases this amount when revising the EDLI rules, the maximum insurance benefit could also rise.
EPFO wage ceiling hike could benefit up to 1 crore new workers
Speaking to ANI, Union Labour and Employment Minister Mansukh Mandaviya said the decision will bring lakhs of additional employees under the EPFO framework and provide them pension security, interest benefits and insurance coverage.
He added that the approval could benefit between 50 lakh and one crore new beneficiaries by bringing more workers under mandatory social security coverage.
Mandaviya said, “Tomorrow is Vishwakarma Jayanti; on the eve of this occasion, the Cabinet under the leadership of PM Modi has taken a significant decision, providing crores of EPFO beneficiaries across the country an opportunity to enhance their social security.”
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“This will extend the benefits of social security to countless new employees who currently fall outside the EPFO's coverage. We estimate that between 50 lakh and 1 crore new beneficiaries will gain from this,” Mandaviya added.
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