Date : 29.6.2017

EPF wage ceiling: Finance Ministry yet to decide on hike to Rs 25,000 per month

The finance ministry is yet to take a call on the labour ministry’s proposal to raise the wage ceiling for mandatory EPF cover to Rs 25,000 per month.

While employees contribute 12% of the basic pay to EPF, the employer contributes 8.33% towards EPS 3.67% to the EPF itself. The government pays 1.16% in addition towards EPS. (Image: PTI)

The finance ministry is yet to take a call on the labour ministry’s proposal to raise the wage ceiling for mandatory EPF cover to Rs 25,000 per month. This is mainly because approving it will cost the exchequer Rs 750 crore in addition to around Rs 2,000 crore now by way of the government’s contribution towards the Employees Pension Scheme (EPS) per subscriber at 1.16% of the wages.

“The labour ministry has already taken up the matter with the finance ministry. Unless they give clearance, it can’t be raised,” a senior government official said. Under the current law, it is mandatory for units employing 20 or more people to provide EPF benefits to workers. While employees contribute 12% of the basic pay to EPF, the employer contributes 8.33% towards EPS 3.67% to the EPF itself. The government pays 1.16% in addition towards EPS.

Employers also pay 0.5% towards EDLI, 0.65% as EPF administrative charges and 0.01% as EDLI handling fee, taking the total contribution to 13.61%. The government also provides grant to the tune of Rs 3,000 crore per annum towards payment of minimum pensions of Rs 1,000 per month. The Central Board of Trustees (CBT), the highest decision-making body of the Employees’ Provident Fund Organisation (EPFO), gave its go-ahead for the proposal to raise the wage ceiling for mandatory EPF cover from `15,000 now for organised-sector workers long ago. Following this, the labour ministry sent the proposal to the finance ministry for its approval which would require to be notified by the government subsequently. Sources said if implemented, it would raise the number of active EPF subscribers by around 50 lakh to 5 crore.

The EPFO’s wage threshold was last raised in November 2014 from Rs 6,500 a month. The wage threshold for medical/cash and insurance benefits under the Employees’ State Insurance Corporation (ESIC) was raised last year to Rs 21,000 per month, from Rs 15,000 previously.

ESIC, another social security venture of the government, had in September last year raised the threshold to Rs 21,000 per insured persons in sync with the hike in minimum wages. “ESIC is different. There the government does not give anything in grant,” said the source, adding that in ESIC the contribution is also less at 6.75-1.75% by the employer and 4.75% by the employer. “But for EPFO, the contribution is 24%. So, raising the threshold limit for EPFI is not easy, plus the government has also provided grant,” the source said.