Summary of this article
Wage ceiling hiked to Rs 25,000 for EPF contribution, adding 51 lakh workers.
The mandatory coverage limit increases after a 12-year gap.
Annual government outlay is estimated to rise to Rs 11,339 crore.
The wage ceiling for mandatory deductions for the Employees’ Provident Fund Organisation’s (EPFO) schemes has finally been raised from Rs 15,000 to Rs 25,000. The Union Cabinet chaired by Prime Minister Narendra Modi has approved the Ministry of Labour and Employment’s proposal to increase the monthly wage ceiling for mandatory coverage. The decision is estimated to bring over 5.1 million more employees under the statutory social security coverage.
The increase in wage ceiling means that employees whose salary is up to Rs 25,000 will now mandatorily be covered under EPFO’s schemes. As the government is focusing on bringing more people under contributory social security coverage, this decision is a move in that direction.
Hike In Wage Ceiling To Match Rising Wages
The policy move came after 12 years. The threshold was changed last time in September 2014, when it was increased from Rs 6,500 to Rs 15,000. Over the years, there has been sustained wage growth and the income level of the formal workforce has risen, but EPFO schemes remained tied to the previous wage ceiling (Rs 15,000).
Simply put, a worker who started working at a salary above Rs 15,000 per month was not automatically enrolled under the EPF framework, which meant leaving them without statutory provident fund, pension, and insurance benefits. However, such employees could still opt for EPF deduction, which many organisations have been practising.
Now, with the rise in the statutory limit, anyone earning up to Rs 25,000 will automatically come under the mandatory EPF coverage rule.
EPFO’s Coverage: EPF, EPS, And EDLI
EPFO has three schemes under its ambit: Employee Provident Fund (EPF), Employee Pension Scheme (EPS), and Employee Deposit Linked Insurance (EDLI), which offer a lump-sum provident fund at the time of retirement, a monthly pension after the age of 58, and life insurance coverage for up to Rs 7 lakh. The rise in wage ceiling will mandatorily bring more employees under EPFO’s ambit.
EPFO’s current enrolment base stands at nearly 80 million (79.8 million) contributing members across 7.68 lakh establishments. Around 8.2 million pensioners are receiving pension under the EPS, while EDLI is available to active members who are contributing to the scheme.
Fiscal Commitment
On the fiscal front, more subscribers under the EPFO’s coverage would mean more budgetary allocation. To fund this, the annual government outgo is expected to reach approximately Rs 11,339 crore, which currently is Rs 10,250 crore. Over a five-year horizon, this expenditure is estimated to be approximately Rs 56,696 crore, as per the report by the PMO India.
The Expenditure Finance Committee has recommended this raise on June 16, 2026, which the cabinet approved today, and the administrative and statutory steps will soon follow.
While a higher wage ceiling could help in long-term retirement savings for employees, this would also mean less salary in hand.
