The government has raised the wage ceiling for mandatory EPFO membership from ₹15,000 to ₹25,000 a month.
The Ministry of Labour and Employment notified the revised ceiling under the Code on Social Security, 2020, with effect from 17 September 2026. According to the ministry, more than 51 lakh employees could come under EPFO coverage for the first time.
An EY report examining the implications of the revised wage ceiling highlighted that the change will affect several aspects of employees’ retirement savings and insurance coverage. Here’s what employees should know.
Who will now have to join EPFO?
Employees earning monthly wages of more than ₹15,000 but up to ₹25,000 will now come within mandatory provident fund coverage.
The EY report noted that under the earlier ceiling, employees earning above ₹15,000 could have been treated as “excluded employees” if their wages exceeded the threshold when they first became eligible for EPF membership.
“With the wage ceiling increasing from ₹15,000 to ₹25,000 per month, an employee earning wages up to ₹25,000 will be mandatorily required to become a member of the Provident Fund,” the report mentioned.
The revised threshold is based on “wages” as defined under the Code on Social Security, 2020, rather than simply the employee’s gross salary.
Will your EPF contribution increase?
For employees whose EPF contribution was earlier restricted to the ₹15,000 ceiling, the employee contribution can increase.
The EY report noted that “the EPF Scheme requires the employer and employee to contribute at the rate of 12% of wages.”
For an employee whose contribution was capped at ₹15,000:
Earlier employee contribution: 12% × ₹15,000 = ₹1,800/month
New employee contribution: 12% × ₹25,000 = ₹3,000/month
Additional deduction from salary: ₹1,200/month
Potential annual reduction in take-home pay: ₹14,400
The employer’s statutory contribution in such a case would also increase from ₹1,800 to ₹3,000. However, the actual impact on an employee’s take-home pay will depend on how the employer structures the salary and calculates PF contributions.
The report noted that where the employer and employee are already contributing on wages or basic salary exceeding ₹25,000, the revised ceiling may not affect their total PF contributions.
Will the entire employer contribution go into your EPF?
No. The employer’s statutory contribution is split between EPF and the Employees’ Pension Scheme (EPS).
According to the EY report, 8.33% of wages is allocated from the employer’s contribution towards the Pension Fund. With the revised wage ceiling of ₹25,000, this works out as follows:
Total employer contribution: 12% × ₹25,000 = ₹3,000/month
EPS contribution: 8.33% × ₹25,000 = ₹2,082.50/month
EPF contribution: ₹3,000 − ₹2,082.50 = ₹917.50/month
Out of the employer’s ₹3,000 statutory contribution, ₹2,082.50 goes towards pension and ₹917.50 is credited to the EPF account. Under the earlier ₹15,000 ceiling, the employer contributed ₹1,800, of which ₹1,249.50 (8.33% × ₹15,000) was allocated to EPS.
The EY report highlighted that “while the overall statutory employer contribution rate remains 12%, the revision principally changes the allocation of the employer’s contribution between the Provident Fund and the Pension Fund.”
Could the higher ceiling increase your pension?
The higher ceiling can increase the wage base used to calculate pension for eligible employees.
The EY report explained that the monthly pension is determined using a prescribed formula based on “pensionable wages” and “years of pensionable service”.
Using the standard EPS pension formula, assuming 30 years of pensionable service:
Earlier: ₹15,000 × 30 ÷ 70 = ₹6,429/month
Revised: ₹25,000 × 30 ÷ 70 = ₹10,714/month
Higher monthly pension: ₹4,285/month
What happens to EDLI insurance coverage?
The Employees’ Deposit-Linked Insurance (EDLI) Scheme applies to EPF members who are required to become EDLI members. As a result, employees newly brought under mandatory EPF coverage by the revised wage ceiling will also be covered under EDLI, the EY report noted.
The employer’s EDLI contribution is 0.5% of wages.
Earlier maximum EDLI contribution: 0.5% × ₹15,000 = ₹75/month
New maximum EDLI contribution: 0.5% × ₹25,000 = ₹125/month
Increase in employer’s cost: ₹50/month per employee
While the revised wage ceiling increases the wage base for calculating EDLI benefits, the maximum benefit payable under the scheme continues to be capped at ₹7 lakh, the report noted.
Disclaimer: This is only for informational and educational purposes. Please consult a qualified expert for the latest laws and regulations.