Employees Provident Fund wage ceiling at Rs 21,000 may soon become reality
The aim of the EPF scheme is to promote retirement savings for employees across India. The amount contributed to the fund is based on a fixed rate.
The buzz over monthly wage ceiling of mandatory Employees Provident Fund (EPF) at Rs 21,000 has been revolving for quite sometime, and looks like this may soon become reality.
As per Financial Express report, the government is set to raise the monthly wage ceiling for mandatory EPF cover to Rs 21,000 from Rs 15,000 at present, a move that could inflate the government’s annual Employees Pension Scheme (EPS) outflow by 50% to Rs 3,000 crore.
Wage limit of these mandatory EPF has not been changed since September 2014 - where Rs 15,000 ceiling was decided from previous Rs 6,500 by the government.
It needs to be noted that retirement body - Employees' Provident Fund Organisation (EPFO) had proposed for a wage limit up to Rs 25,000 per month for coverage under social security schemes.
However, this was later known by many media reports that, the labour ministry is almost ready to make a hike in the wage threshold to Rs 21,000 per month.
According to EPFO, hike in EPF wage limit would bring in 50 lakh more formal sector workers into the social security in addition to its existing subscriber base of around 4 crore workers.
Currently, government pays 1.16% of the wages to each subscriber who are earning less than Rs 15,000 per month towards EPS. While employees contribute 12% of the basic pay towards EPF.
At the same time, employer contributers 8.33% towards EPS for pay up to Rs 15,000 and 3.67% of the pay to EPF. They also contribute 0.5% towards Employee Deposit Linked Insurance Scheme (EDLI), 0.65% as EPF administrative charges and 0.01% as EDLI handling fee.
Earlier Ministry of Labour and Employment during Public Accounts Committee 2015 - 16 report, highlighted that, revision of wages for mandatory coverage is a process which involves tripartite consultation among Employer, Employee and the Government and it also involves concurrence of Ministry of Finance as it is a Policy decision having budgetary impact.
With the contribution of 1.16% towards EPFO subscribers total basic wages, the government bears an annual burden to the tune of Rs 6,750 crore.