Employees Provident Fund Organization (EPFO) is preparing for major changes in the rules. The salary limit is likely to be increased to Rs 25,000 per month in the coming months to mandatorily include employees in the Employees' Provident Fund (EPF) and Employees' Pension Scheme (EPS). At present, the salary limit is Rs 15,000 per month. This is the statutory limit of mandatory contribution to EPF and EPS – which is managed by EPFO.
Employees whose basic salary is more than Rs 15,000 per month have the option to opt out of both these EPFO schemes. Emplorya does not have any legal right to register such employees under EPF and EPS. The Central Board of Trustees of EPFO may discuss the issue in its next meeting – which will likely be held in December or January – where the final approval may be given.
According to an internal assessment of the Labor Ministry, the increase in salary limit by Rs 10,000 per month will make social security benefits mandatory for more than one crore people, an official said in a Money Control report. The person further said that labor unions have been demanding an increase in the wage limit for a long time as the monthly wages of many low or medium-skilled workers in many metros are more than Rs 15,000 per month. The higher limit will make them part of EPFO.
According to the current rules, it is mandatory for both the employer and the employee to contribute 12-12 percent of the employee's salary every month. However, the entire 12 per cent goes into the employee's EPF account, while the employer's 12 per cent is divided between EPF (3.67 per cent) and EPS (8.33 per cent). Officials said the increase in the salary limit will also lead to a rapid increase in the EPF and EPS funds, which will lead to an increase in pension payments to employees on retirement and also increase the accumulation of interest loan. The total corpus of EPFO is currently around Rs 26 lakh crore, and the number of its active members is around 7.6 crore.
Experts say the proposed proposal to increase the EPF salary limit from Rs 15,000 to Rs 25,000 per month is a progressive step towards expanding social security coverage and bringing the limit in line with the current salary level. They say this will help a large section of India's workforce achieve long-term financial security and retirement benefits, which have become increasingly relevant amid increasing economic instability.
