EPFO wage ceiling hike: Union Cabinet increases mandatory salary limit to ₹25,000; check impact

The Union Cabinet on Wednesday, September 16, 2026, decided to increase the mandatory wage ceiling for EPFO schemes from ₹15,000 to ₹25,000. This decision will lead to higher EPF and EPS contributions.

"The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved the proposal of the Ministry of Labour & Employment to enhance the wage ceiling for mandatory coverage under the Employees’ Provident Fund Organisation (EPFO) from ₹15,000 to ₹25,000 per month," a Cabinet release said.

The increased wage ceiling will come into effect from September 17, 2026.

According to the release, the decision to increase the mandatory wage ceiling is expected to bring more than 51 lakh additional employees within the ambit of mandatory EPFO coverage.

Announcing the Cabinet decision at a media breifing, Union Minister Ashwini Vaishnav said, "This was a demand for long and has now been approved by the PM. This wider security social net will help employees and employers both. Unskilled minimum wage has increased beyond ₹15,000 in many states, so this 2014 cap had no basis. So after consultations we have decided to increase salary cap of ₹25,000."

What will be the impact of EPFO wage ceiling hike?

For an employee earning ₹15,000, currently it is mandatory for both employers and employees to separately contribute 12% i.e. ₹1800 towards EPFO schemes.

While employees earning more than ₹15,000 can opt for voluntary contributing a higher amout towards EPF, the higher wage ceiling may also increase the mandatory contribution to 12% of ₹25,000, which is ₹3000. However, more clarity on this is expected to be provided by the Labour Ministry soon.

As per present rules, a fresh employee joining employment at a wage above ₹15,000 per month is not automatically covered under the EPF framework. He may chose to remain outside mandatory provident fund, pension and associated insurance protection.

"Raising the ceiling to ₹25,000 will bring a substantial segment of employees in the ₹15,000– ₹25,000 wage band within the statutory social security framework," the Cabinet release said.

The wage ceiling hike also 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.

Moreover, will also enable higher statutory contribution and pensionable-wage framework to better reflect prevailing wage levels.

The EPFO wage ceiling was last revised in September 2014. Since then, "India has witnessed sustained wage growth, rising incomes and continued expansion of formal employment. In several States and occupations, minimum wages have also moved closer to the existing threshold. The enhancement to ₹25,000 therefore updates the EPFO framework in line with rising wage levels and extends the benefits of formal social security to a wider segment of the workforce," Union Cabinet said.