After Seen 6.6% Rise of EPFO Contributors Government plans to hike EPF wage ceiling to Rs 21,000

In a bid to extend social security benefits to a broader workforce, the Central government is considering raising the wage ceiling under the Employees’ Provident Fund (EPF) scheme from Rs 15,000 to Rs 21,000 per month.

In the fiscal year 2024, the Employees’ Provident Fund Organisation (EPFO) witnessed significant growth in its contributing organizations and members, alongside a remarkable increase in arrear dues realization and claim settlements. The statistics presented during the 109th Meeting of the Executive Committee of the Central Board, EPFO poised government to hike EPF wage ceiling.

EPFO’s Growth in FY24

The EPFO experienced a 6.6% year-on-year increase in contributing organizations, rising to 7,66,000. Concurrently, the number of contributing members saw a 7.6% growth, reaching 73.7 million. This surge highlights the expanding coverage and relevance of EPFO in providing social security benefits to a larger workforce. The organization also achieved a substantial 55.4% increase in realizing arrear dues, amounting to Rs 5,268 crore. Additionally, the number of claims settled rose by 7.8% year-on-year, underscoring EPFO’s commitment to efficient service delivery.

Key Highlights from the 109th Meeting

The 109th Meeting of the Executive Committee, chaired by Labour Secretary Sumita Dawra, underscored several pivotal proposals aimed at enhancing EPFO’s operations and governance. Key highlights from the meeting included:

Relaxation in Claim Settlement Criteria: The committee appreciated the relaxation of criteria for auto-settlement of claims, including adjustments to the ceiling and categories of admissible grounds for claims. This move aims to streamline processes, making it easier for members to have their claims processed efficiently.
Hiring Chartered Accountant Firms: To bolster financial management, the committee approved the hiring of two Chartered Accountant firms for the preparation of Annual Financial Statements and to facilitate the automation of this process.
Draft of New Compassionate Appointment Policy, 2024: The committee considered the draft policy aimed at providing relief to dependents and wards of deceased EPFO employees, particularly those who passed away during the Covid pandemic.
Centralized Pension Payment and IT Interventions: Discussions included steps to enable centralized pension payment and interventions to improve IT-related software and hardware. Timelines for the overhaul of the IT system were also noted to ensure effective implementation.

Proposed EPF Wage Ceiling Hike

In a bid to extend social security benefits to a broader workforce, the Central government is considering raising the wage ceiling under the Employees’ Provident Fund (EPF) scheme from Rs 15,000 to Rs 21,000 per month. This would be the first increase since September 2014, when the limit was more than doubled from Rs 6,500 to Rs 15,000. The proposed hike aims to ensure a more secure retirement and financial future for workers earning under the new threshold.

Implications of the Wage Ceiling Increase

The proposed increase in the EPF wage ceiling has several far-reaching implications:

Enhanced Social Security Coverage: By raising the wage ceiling, the government seeks to expand the scope of EPF coverage, bringing more workers under its umbrella. This expansion is part of a broader initiative to improve financial protections for employees across various sectors.
Eligibility for Employees’ Pension Scheme (EPS): Currently, EPF participants with a basic salary above Rs 15,000 are ineligible to join EPS. With the proposed ceiling of Rs 21,000, employees earning above Rs 15,000 would qualify for EPS enrolment, allowing them to receive pension benefits upon retirement. However, it is important to note that enrolling in EPS would redirect a portion of the employer’s EPF contribution (8.33% of the total 12%) to EPS, reducing the balance accumulated in the employee’s EPF account.
Impact on EPS Contributions: The current cap on EPS contributions is Rs 1,250 per month, calculated at 8.33% of the Rs 15,000 wage limit. With the proposed increase to Rs 21,000, this cap would rise accordingly, impacting the contributions made to EPS.

Implications for Employers

The proposed changes also include lowering the headcount threshold required for a company to qualify for EPF registration under EPFO. This adjustment is expected to significantly increase EPF coverage, granting more workers access to EPF and pension benefits. For employers, these changes imply a need for enhanced compliance with EPFO regulations and potential adjustments to their payroll systems to accommodate the new wage ceiling and registration requirements.

With continued efforts to streamline processes and enhance governance, EPFO is poised to further strengthen its impact on the workforce, providing robust financial protections and fostering a secure retirement for millions of workers.

For a deeper insight into the evolving workplace paradigm, stay tuned to PeopleManager.co.in.

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