EPS pension hike: Is EPFO planning to increase the salary limit to ₹25,000? All you need to know

Recently, a report by Moneycontrol quoting official sources said that the Employees’ Provident Fund Organisation (EPFO) is planning to increase its wage ceiling for mandatory inclusion of employees in the Employees' Provident Fund (EPF) and the Employees' Pension Scheme (EPS) to ₹25,000, from ₹15,000 currently. 

The EPFO’s Central Board of Trustees (CBT) is likely to take this up for discussion in its next meeting, which is expected to be held in December or January, where the Board could grant a formal approval, the report said. 

What is the EPFO wage ceiling?

The EPFO wage ceiling is the maximum monthly basic salary limit on which mandatory EPF and EPS contributions are calculated. Currently, the ceiling is ₹15,000 per month, which means that if your basic salary and dearness allowance combined are ₹15,000 or less, your employer must mandatorily register you under EPF and EPS.

If you earn more than ₹15,000, you can opt out, and your employer is not legally required to include you in these schemes. This means those earning above ₹15,000 aren’t legally eligible to receive PF contributions from their employers, and employers don’t have to enroll them under EPF and EPS mandatorily. 

Has the wage ceiling been raised?

No, the EPFO hasn’t announced any change in the wage ceiling yet. As there hasn’t been any official announcement, the ceiling remains at ₹15,000. 

If implemented, how will this benefit members?

If this ceiling is raised, more employees (earning between ₹15,000 and ₹25,000) will automatically come under EPF and EPS coverage. The new ceiling could benefit 10 million additional employees, the Moneycontrol report said. 

Currently, both the employer and the employee contribute 12% of the employee’s basic salary to the EPF. If the salary base increases, contributions to the fund will also increase. With higher monthly deposits, subscribers will earn more interest over time. 

Additionally, since EPS is linked to the wage on which contributions are made, a higher salary base would result in a higher pension after retirement for the members. 

As per the Moneycontrol report quoting officials, an increase in the wage ceiling would also lead to a sharp rise in EPF and EPS corpus, increasing the pension payout for employees on retirement and resulting in a higher accumulation of interest credit.

It will offer long-term financial protection and retirement benefits to a broader segment of India’s workforce amid rising economic volatility, the officials noted.