After 12 years, the Center raises the salary ceiling of EPFO to ₹25,000 per month
In line with the new wage ceiling, employee and employer contributions to the EPS will also increase. File. | Photo credit: The Hindu
The Union Cabinet on Wednesday (September 16, 2026) approved raising the wage ceiling for mandatory coverage under the Employees’ Provident Fund Organization (EPFO) to ₹25,000 per month from ₹15,000, Information and Broadcasting Minister Ashwini Vaishnaw said while briefing reporters after the Cabinet meeting.
The new cap will be implemented from September 17 to coincide with Vishwakarma Jayanti. Employers’ organizations welcomed the announcement and asked the Union government to help implement it, while unions described the increase as “too little too late”.
In a press release, the Union government said the decision is expected to bring more than 51 lakh additional employees under the mandatory EPFO coverage. The decision will also expand access to pension fund savings, pension protection under the Employee Pension Scheme (EPS) and insurance protection under the Employee Deposit Linked Insurance (EDLI), the statement added.
Annual government expenditure is estimated at ₹11,339 crore, against the existing annual budgetary support of about ₹10,250 crore. In line with the new wage ceiling, employee and employer contributions to the EPS will also increase.
Later, while talking to reporters at his official residence, Union Labor Minister Mansukh Mandaviya said that ₹23,000 is the average salary in private establishments, according to a government survey.
“More workers will get the benefits of supplementary pension, death insurance and better interest on their savings as EPFO expands its coverage,” he said. Mr. Mandaviya said employers’ contribution will increase by ₹600 per employee, while employees’ EPS contribution will also increase to around ₹2,082.5 per month — 8.33% of the new ceiling of ₹25,000 — from the current amount of ₹1,250. He added that between 51 million and one million workers will benefit from the decision.
“Too Little Too Late”
All India Trade Union Congress general secretary Amarjeet Kaur said the decision was too little too late. “The last time the ceiling was raised was in 2014. It should be at least ₹30,000 to account for inflation. Employees may see their take-home pay reduced. So the government needs to ensure that employers pay their share in a transparent manner, rather than it being part of the company’s cost and shifting the burden to employees,” she said.
Association of Indian Entrepreneurs (AIE) national president KE Raghunathan said EPFO software needs to be upgraded to handle the additional volume of subscribers. “Employers, especially SMEs, would find it very difficult to absorb the additional pressure on their attrition, especially when most of them are struggling to make a profit. This should not deter them from formal employment and instead opt for gig work. In the case of SMEs, the Government of India has to absorb this increase for two years,” he said. .
According to him, the reform was long overdue. “In the short term, there could be some increase in operating costs, especially for manufacturing and SMEs. However, in the long term, stronger social security for workers is an important investment in India’s workforce,” he added.
Indian Staffing Federation Executive Director Suchita Dutta said the decision is a structural boon for formalisation. “The threshold increase narrows the cost arbitrage enjoyed by unorganized players, rewards compliant employers and accelerates the transition from informal to formal,” she said, adding that employers face a modest increase in contributions for this wage band. “The decision affirms the integration of formal employment that brings portable social security. It reaffirms staffing as India’s primary engine for transforming the informal workforce into a formally covered, secure one,” she said. contribution.
The Indian Staffing Federation is the apex body for the flexi-staffing industry.
Published – 16 Sep 2026 15:36 IST