EPFO wage ceiling raised to ₹25,000 for better social security net

The government on Wednesday raised the wage ceiling for mandatory Employees’ Provident Fund (EPF) coverage

to ₹25,000 a month from ₹15,000, bringing more than 5.1 million additional employees under the statutory social security framework.

The move to have mandatory provident fund coverage for those earning upto ₹25,000 a month also raises the contribution obligation of employers.

The revised ceiling will take effect from September 17, Labour and Employment Minister Mansukh Mandaviya said at a press briefing.

The decision will extend mandatory coverage to a larger section of employees in the ₹15,000-25,000 monthly wage band, who are currently not automatically covered when they join employment at wages above the existing ceiling.

The higher ceiling will bring these employees within the framework of provident fund savings, pension eligibility under the Employees’ Pension Scheme (EPS) and insurance protection under the Employees’ Deposit Linked Insurance Scheme (EDLI), subject to the applicable scheme provisions.

The government estimated annual outgo on the measure at ₹11,339 crore, compared with the existing annual budgetary support of about ₹10,250 crore. The estimated expenditure over five years was pegged at ₹56,696 crore.

The wage ceiling had remained unchanged since September 2014, when it was raised to ₹15,000. The government said the latest revision reflected sustained wage growth, rising incomes and the expansion of formal employment since then.

Mandaviya said the average income of a regular salaried employee was now around ₹23,000 a month, while minimum wages for even unskilled workers had crossed ₹15,000 in several states. The government said the existing threshold therefore no longer reflected prevailing wage levels.

EPFO currently has around 79.8 million contributing members across about 768,000 contributing establishments, according to the latest data cited by the government.

The Employees’ Pension Scheme provides pension benefits to around 8.2 million pensioners, while EDLI provides insurance protection linked to EPF membership.

The government said the revision would also strengthen the portability of social-security benefits for workers as a larger number of employees entered mandatory EPFO coverage. It said wider coverage could support worker retention, workforce stability and formalisation.

The decision followed detailed inter-ministerial consultations and was recommended by the Expenditure Finance Committee at its meeting on June 16, 2026.

The move will also increase the number of employees for whom statutory contributions have to be made. A senior government official said the employer contribution could increase by around ₹600 per employee per month on average, while the compulsory pension contribution for employees could rise from ₹1,250 to roughly ₹2,000.

“Costs for employers will definitely go up significantly,” the official said, adding that the voluntary route had not resulted in significant additional enrolment because many establishments had maintained that they did not have employees below the existing wage ceiling. The revised threshold would instead make coverage compulsory for a substantially larger pool of workers, the official said.

Puneet Gupta, partner, People Advisory Services-Tax, EY India, said the EPF wage ceiling serves multiple purposes beyond determining mandatory coverage, including determining eligibility for membership of the Employees’ Pension Scheme (EPS) and the basis for contributions under the Employees’ Deposit Linked Insurance (EDLI) Scheme. He said the increase would therefore expand both the scope and quantum of social-security benefits available to employees.

“It will also have a direct cost implication for employers through higher PF, pension and EDLI contributions, particularly for employees currently drawing wages between ₹15,000 and ₹25,000 where contributions are restricted to the statutory ceiling. Employees in the affected salary bracket are also likely to witness a reduction in take-home pay due to the higher employee PF contribution,” Gupta added.

Debjani Aich, partner, CMS INDUSLAW, said employers would need to make changes to HR and payroll systems and employee documentation to electronically handle PF filings under the expanded coverage. “There may be some impact on the cost to the company (CTC) structure and take-home pay for newly covered employees, which will need to be determined as the changes play out,” she said.

Suchita Dutta, executive director, Indian Staffing Federation (ISF), an industry body representing staffing firms, said wider access to portable social security for workers in the Rs 15,000-25,000 wage band could make formal flexi employment— jobs with flexible work hours, location and duration unlike a regular, fixed schedule job–more attractive and help address attrition in the staffing industry.

“Raising the threshold narrows the cost arbitrage that unorganised players exploit, rewarding compliant employers and accelerating the informal-to-formal shift,” she said.

However, the additional employer cost could be more difficult for smaller businesses to absorb. K E Raghunathan, national chairman, Association of Indian Entrepreneurs (AIE), said the increase could raise operating costs, particularly for manufacturing companies and MSMEs, in the short term.

“The employers especially MSMEs would find it very tough to absorb the additional strain on their outflow, especially when most of them struggling to make any profit. The government must absorb this increase for two years in the case of MSMEs,” he added.

The decision also came months after the Supreme Court directed the Centre and the EPFO in January to decide within four months on a revision of the wage ceiling, which had remained unchanged since 2014. The issue had also been pushed by trade unions for years, with worker representatives arguing that the ₹15,000 ceiling no longer reflected prevailing wage levels.

In earlier deliberations of the EPFO’s Central Board of Trustees, members had sought a revision to ₹25,000, while trade unions have at various points demanded a higher ceiling of up to ₹40,000.