EPFO wage ceiling hike could benefit up to 1 crore new workers: Mandaviya

New Delhi [India], September 16 (ANI): Union Labour and Employment Minister Mansukh Mandaviya on Wednesday said the increase in the EPFO wage ceiling from Rs 15,000 to Rs 25,000 per month could benefit between 50 lakh and one crore new beneficiaries by bringing more workers under mandatory social security coverage.
“We estimate that between 50 lakh and 1 crore new beneficiaries will gain from this,” Mandaviya said, reacting to the Cabinet decision.
On the implementation timeline, the minister said the higher wage ceiling would be implemented from Thursday, September 17, which marks Vishwakarma Jayanti.
The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved raising the wage ceiling for mandatory coverage under the Employees’ Provident Fund Organisation (EPFO) to Rs 25,000 per month from Rs 15,000.
“This will extend the benefits of social security to countless new employees who currently fall outside the EPFO's coverage,” Mandaviya told ANI.
The higher ceiling will bring a larger number of employees in the Rs 15,000-Rs 25,000 wage bracket within mandatory EPFO coverage and 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), subject to applicable provisions.
The EPFO wage ceiling was last revised in September 2014, when it was increased to Rs 15,000.
Commenting on the decision, Puneet Gupta, Partner, People Advisory Services-Tax at EY India, said the increase would expand social security benefits but would also have cost implications for employers and employees.
“Mandatory EPF contributions will correspondingly apply on wages up to Rs 25,000 per month instead of Rs 15,000. This is expected to enhance retirement savings and social security coverage for employees,” Gupta said.
However, he said employers could face higher PF, pension and EDLI contributions, particularly for employees earning between Rs 15,000 and Rs 25,000 where contributions are currently 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 said.
He added that employers should await the formal notification and detailed implementation provisions before assessing the full impact of the revised wage ceiling. (ANI)