EPFO may raise wage ceiling to Rs 25,000, bringing over 1 crore more workers into pension cover

The Employees’ Provident Fund Organisation (EPFO) is considering a major overhaul of its eligibility norms by raising the wage ceiling for mandatory provident fund and pension contributions, according to reports. The current cap of Rs 15,000 per month—unchanged since it was raised from Rs 6,500 in 2014—determines who is automatically enrolled under the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS).

At an industry event in Mumbai, Department of Financial Services (DFS) Secretary M Nagaraju highlighted the urgency behind the review. “It is very bad that so many people earning just above Rs 15,000 have no pension cover and end up relying on their children in old age,” he said, underscoring the need to update outdated thresholds that no longer reflect India’s income landscape.

Under the present rules, only employees earning up to Rs 15,000 in basic pay must be brought under EPF and EPS. Those earning even marginally above this can opt out, and employers are not obligated to register them. This leaves a large portion of urban, private-sector workers without formal retirement savings, despite earning modest salaries.

Reports indicate that EPFO may raise the ceiling to Rs 25,000, with the matter expected to be taken up by the Central Board of Trustees early next year. An internal labour ministry assessment suggests that increasing the limit by ₹10,000 could bring more than one crore additional workers under mandatory EPF and EPS coverage. Trade unions have long pushed for such a revision, arguing that the existing cap is outdated amid rising living costs and wage levels.

The potential shift aligns with a broader push to strengthen India’s social security architecture. Enrolments under the Atal Pension Yojana, for instance, have crossed 8.3 crore, yet experts note that a majority of Indians still lack structured retirement savings or adequate life insurance. Raising the EPF ceiling would automatically channel millions more into long-term, tax-efficient savings plans.

For employees, the change would result in higher monthly contributions, a larger EPF corpus, and improved pension payouts. Currently, employees contribute 12% of basic salary, matched by employers, who split their share between EPF and EPS. A higher wage base would amplify contributions from both sides.

For employers, costs per worker will rise; however, the measure is widely viewed as strengthening employee welfare and reducing long-term financial insecurity.

EPFO already manages a ₹26 lakh crore corpus with 7.6 crore active members. Expanding mandatory coverage would significantly deepen India’s pension net. If approved, the revised ceiling would mark one of the most consequential social security reforms in a decade, improving retirement readiness for millions of low- and middle-income earners.

New changes in EPS

The Employees’ Pension Scheme (EPS) has undergone several significant changes aimed at improving long-term security for workers and strengthening the pension framework. The biggest update is the extension of the EPS withdrawal waiting period from two months to 36 months. Employees can now withdraw their EPS balance only after three years of unemployment or leaving a job. This move discourages early withdrawals and encourages members to stay invested long enough to receive lifelong pension benefits.

Another key development is the government’s ongoing review of the minimum pension, currently at Rs 1,000 per month. After 11 years without revision, the Parliamentary Standing Committee on Labour has recommended an increase, and an announcement is expected soon, offering relief to EPS pensioners struggling with rising living costs.

The EPFO has also launched a fully digital pension payment system (CPPS), allowing pensioners to receive payments from any bank branch without applying for a transfer. This ensures faster, transparent, and hassle-free disbursement.

In addition, the EPFO has clarified that employees who contributed to EPS on their higher actual salary—and whose contributions were accepted—will be eligible for a higher pension, resolving long-pending concerns.

A comprehensive review of the EPS-95 scheme is also underway, covering benefit formulas, contribution rates, and overall structure. Experts say these changes will strengthen pension security and enhance transparency for millions of employees.