India’s social security system for salaried workers is built around the Employees’ Provident Fund Organisation (EPFO). Under the current rules, any employee earning ₹15,000 or less (basic pay + DA) per month must be mandatorily enrolled in the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS).
Those earning above this limit are not compulsorily covered.
However, strong discussions within policy circles indicate that the government is actively considering raising this salary ceiling — potentially to ₹25,000 per month. If approved by the EPFO’s Central Board of Trustees (CBT) and officially notified, this change will significantly expand.
This article explains what the proposed change means, why it matters, the benefits and challenges, and how it may impact employees, employers, and the EPF system.
Background: Why the Salary Ceiling Exists
- The wage ceiling determines who must be mandatorily covered under EPF and EPS.
- This ceiling was last revised in 2014, increasing from ₹6,500 to ₹15,000.
- Workers earning above the ceiling may opt out, reducing the reach of EPF/EPS among mid-income employees.
- Because wages and cost of living have risen sharply in the past decade, the ₹15,000 limit is now considered outdated.
Raising the ceiling would bring millions of workers into mandatory EPF coverage and improve their retirement security.
Why the Government Is Considering Raising the Ceiling
1. Rising Wages and Inflation: Salary levels have increased significantly across sectors. A ₹15,000 threshold no longer reflects current wage conditions.
2. Expand Social Security Coverage: A higher ceiling ensures that more workers enjoy compulsory provident fund and pension protection.
3. Stronger Retirement Benefits: Since pension calculations depend on the salary on which contributions are made, a higher limit means:
- Higher future pension payouts
- Larger retirement corpus for employees
4. Strengthen EPF/EPS Funds: Higher wages being brought under contribution would increase overall EPFO corpus size and improve long-term financial sustainability.
5. Boost Formalisation: More workers and employers will remain on official payrolls, improving compliance and reducing informal employment practices.
Who Will Benefit?
Employees Earning Between ₹15,000 and ₹25,000
- Will be mandatorily covered under EPF/EPS
- Will build a larger retirement fund
- Will become eligible for pension benefits
- Will gain long-term income security
Young Workers in the Private Sector
Especially in regions where salaries hover around this band (like Assam and many Tier-2 cities).
Economy
- Higher domestic savings
- More long-term capital available for infrastructure and national development
Impact on Employers
While the reform benefits workers, employers may face:
- Higher contribution cost (as more employees fall under coverage)
- Increased payroll obligations
- Need for updated HR and compliance systems
- Possible wage restructuring to reduce basic pay and avoid higher contributions
The government will need to ensure clear guidelines to reduce non-compliance or complex salary structuring.
Impact on the Government and EPFO
- EPFO will see a larger member base and higher contributions
- Pension liabilities will increase and require careful actuarial analysis
- Digital systems and records will need updates
- A phased implementation may be required to ensure smooth transition
Challenges Ahead
- Ensuring Employer Compliance – Avoid under-reporting of wages.
- Actuarial Balance – Pension schemes must remain financially sustainable.
- Administrative Load – Millions of new accounts must be processed efficiently.
- Communication and Awareness – Workers must clearly understand their entitlements.
Conclusion
Raising the mandatory EPF/EPS salary ceiling from ₹15,000 to ₹25,000 would be a transformative step for India’s social security system. It would broaden pension coverage, strengthen retirement savings, and safeguard millions of workers who currently remain outside the EPF umbrella.
While implementation challenges exist — such as employer compliance, increased financial liability, and administrative preparation — the long-term benefits of a more secure and financially protected workforce outweigh the difficulties.
FAQs
1. What is the current salary limit for mandatory EPF and EPS membership?
Ans: The current salary ceiling is ₹15,000 per month (basic + DA).
2. Why is the government considering raising it to ₹25,000?
Ans: To increase pension coverage, reflect rising wages, and improve retirement security for more workers.
3. Who will benefit the most?
Ans: Employees earning between ₹15,000 and ₹25,000 who are currently not mandatorily covered under EPF/EPS.
4. Will this increase pension amounts?
Ans: Yes. Higher contribution wages mean higher pension calculations in the long term.
5. Will employers’ costs increase?
Ans: Yes. Employers will need to contribute more because more employees will fall under mandatory coverage.
My self Anita Sahani. I have completed my B.Com from Purbanchal College Silapathar. I am working in Dev Library as a Content Manager. A website that provides all SCERT, NCERT 3 to 12, and BA, B.com, B.Sc, and Computer Science with Post Graduate Notes & Suggestions, Novel, eBooks, Health, Finance, Biography, Quotes, Study Materials, and more.
