Significant and reassuring news has arrived for millions of people employed by the Employees’ Provident Fund Organization (EPFO). The Finance Ministry has approved raising the salary threshold for mandatory coverage from ₹15,000 per month to ₹25,000 per month. This threshold had remained unchanged for over a decade. According to reliable sources, once this new limit is implemented, more salaried employees will be covered by mandatory provident fund and pension coverage. However, a final decision on when this will officially be implemented will be made only after the Cabinet approves it.
What are the current rules and what changes will come?
Under current rules, only employees earning up to ₹15,000 per month were compulsorily covered by the government’s Employee Provident Fund (EPF) and Employee Pension Scheme (EPS). However, with this threshold now being raised, employees earning a basic salary of up to ₹25,000 will also be covered by these government schemes. However, this significant move will undoubtedly increase compliance costs for both companies and the government.
25,000 stamped instead of 30,000 rupees
According to media reports, before settling on the final limit of ₹25,000, the ministry also considered a limit of ₹30,000. A government source stated that the Finance Ministry has now approved a proposal to increase the EPF salary limit to ₹25,000 per month. Initially, there were discussions to raise the limit to ₹30,000, but ultimately, the ₹25,000 proposal was approved. The entire matter will now be presented to the Union Cabinet for final approval.
Private sector employees will get social security cover
Currently, only employees earning a basic salary of up to ₹15,000 per month are covered by EPF and EPS. Employees earning more than this limit are exempt, and companies are not legally required to include them. However, when this threshold is raised to ₹25,000, millions of employees earning between ₹15,000 and ₹25,000 will also be covered. This change is expected to significantly increase social security coverage for private sector employees.
How much will it affect companies and the government?
For employers, this decision means that a significant portion of their workforce will now be subject to mandatory contributions, increasing their payroll costs. Furthermore, this change is likely to increase the financial burden on the government as well. According to the rules, the company (employer) contributes 8.33% of the basic salary to the pension fund, while the government contributes 1.16% of the basic salary. The Employees’ Pension Scheme (EPS) has received a massive budget allocation of ₹11,144 crore for the financial year 2026-27.
Know which institutions and employees will be subject to the rule?
It’s worth noting that this mandatory EPF and EPS coverage applies only to organizations with at least 20 or more employees. Smaller companies can register voluntarily, but there’s no pressure to do so. This entire change is primarily limited to the organized private sector, as central government employees fall under a separate pension system and are completely outside the scope of EPS.