The Centre has put on hold its proposal to raise the mandatory ceiling from Rs 15,000 to Rs 25,000 a month, delaying a move that could have brought social security benefits to millions of more workers, reported Moneycontrol.
The government has decided not to move ahead with the proposal for now as it does not want to increase the financial burden on companies, which are already facing higher compliance costs due to the implementation of the new labour codes.
A senior government official told Moneycontrol that the wage ceiling would eventually be raised, but only after consultations with stakeholders.
“The government doesn’t want to put extra financial burden on companies right now. The wage ceiling will be raised, but only after proper stakeholder consultation,” the official was quoted as saying.
At present, the statutory wage ceiling for mandatory contributions under the is Rs 15,000 a month. The limit has remained unchanged since 2014.
Employees earning a basic salary of up to Rs 15,000 a month must contribute 12% of their basic pay to EPF. Employers also contribute 12%, with a part of their contribution going to the Employees’ Pension Scheme (EPS) and the rest to the EPF account.
This means the maximum mandatory EPF contribution is currently capped at Rs 1,800 each from the employee and the employer.
If the wage ceiling had been increased to Rs 25,000, the maximum mandatory EPF contribution would have risen to Rs 3,000 each from both the employee and the employer.
The proposal was also expected to bring more workers under the mandatory EPFO framework.
According to an internal assessment by the Labour Ministry cited in the report, increasing the wage ceiling by Rs 10,000 could make EPF and EPS coverage compulsory for more than 1 crore additional workers.
Labour unions have been seeking such a revision for years, arguing that many low- and mid-skilled workers in metro cities now earn more than Rs 15,000 a month, making EPF enrolment optional instead of mandatory.
According to the report, the government believes this is not the right time to increase statutory costs for businesses.
Industry executives told quoted in the report that the new labour codes have already increased companies’ statutory liabilities by around 15% to 20%. In the IT sector alone, businesses have incurred more than Rs 1,000 crore in additional compliance costs because of the new rules.
Against this backdrop, the government has decided to defer the wage ceiling revision until there is wider consultation with industry and other stakeholders.
The proposal has not been dropped.
Government sources told Moneycontrol that the wage ceiling will eventually be revised, but only after stakeholder consultations are completed. No timeline has been announced yet.
The EPFO currently manages a corpus of around Rs 27-28 lakh crore and has nearly 8 crore active members, making it one of the world’s largest social security organisations.