Cabinet approves raising EPFO wage ceiling to Rs 25,000

The Union Cabinet approved raising the EPFO wage ceiling for mandatory coverage from Rs 15,000 to Rs 25,000 a month. The move is expected to bring more than 51 lakh additional employees under statutory provident fund, pension and insurance protection

New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved the proposal to enhance the wage ceiling for mandatory coverage under the Employees’ Provident Fund Organisation (EPFO) from Rs 15,000 to Rs 25,000 per month, with the decision expected to bring more than 51 lakh additional employees within its ambit, significantly widening social security protection for workers.

At present, a fresh employee joining employment at a wage above Rs 15,000 per month is not automatically covered under the EPF framework and may remain outside mandatory provident fund, pension, and associated insurance protection. Raising the ceiling to Rs 25,000 will bring a substantial segment of employees in the Rs 15,000–Rs 25,000 wage band within the statutory social security framework, a Cabinet communique said.

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The approval 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. It will also enable the statutory contribution and pensionable-wage framework to better reflect prevailing wage levels.

The proposal underwent detailed inter-ministerial consultations and was recommended by the Expenditure Finance Committee in its meeting held on June 16. The annual government outgo is estimated at Rs 11,339 crore, against the existing annual budgetary support of about Rs 10,250 crore. The estimated expenditure over five years is approximately Rs 56,696 crore, the statement said.

The EPFO wage ceiling remained unchanged throughout the decade from 2004 to 2014, before being substantially enhanced to Rs 15,000 in September 2014. The present decision carries forward this approach by further raising the ceiling to Rs 25,000 to reflect the sustained wage growth, rising incomes and a continued expansion of formal employment over the intervening years, according to the communique.

The measure is expected to give a further impetus to formalisation of employment, worker retention, and long-term retirement security. By bringing a larger number of employees automatically within the statutory social security framework, the decision strengthens the principle that formal employment should be accompanied by portable and assured social security protection. For employers as well, wider social security coverage can support employee retention, workforce stability, morale and the development of a more secure and future-ready workforce.

EPFO today operates one of the world’s largest social security systems, administering the Employees’ Provident Fund (EPF), the EPS, and the EDLI. The latest EPFO data show around 7.98 crore contributing members across about 7.68 lakh contributing establishments, while the EPS provides pension benefits to around 82 lakh pensioners. EDLI provides insurance protection linked to EPF membership.

India’s workforce is at the heart of its growth story. As wages rise, incomes improve, and formal employment expands, the government’s continued emphasis on employment generation and formalisation is creating new opportunities for workers. The enhancement of the EPFO wage ceiling ensures that the social security framework also keeps pace with this progress and that a larger number of workers in formal employment receive statutory social security protection.

This approval marks another important step towards building an inclusive, resilient and future-ready social security architecture, ensuring that social protection advances alongside economic growth, rising wages and expanding formal employment, the statement added.