The Labour and Employment Ministry has asked employers not to reduce employees’ statutory wages following the increase in the Employees’ Provident Fund Organisation wage ceiling from ₹15,000 to ₹25,000 a month.
The revised limit took effect on September 17 and is expected to extend mandatory EPFO coverage to more than 10 million additional workers. The move will widen access to provident fund, pension and insurance benefits.
Employers told not to adjust wages
The ministry’s directive comes amid concerns that some employers could seek to offset their higher statutory contribution by altering employee compensation structures or incorporating the additional cost into Cost to Company calculations.
It has clarified that an employer’s statutory contribution should not effectively become an employee deduction merely because it is included in the CTC.
Companies have been advised to deposit the required contributions properly without reducing statutory wages to absorb the additional expense.
The ministry described employer social security contributions as an investment in human resource practices, saying stronger employee benefits could support workforce satisfaction and retention.
Employers may also be able to partly offset the increased financial burden through incentives under the Pradhan Mantri Viksit Bharat Rojgar Yojana. The scheme provides incentives of up to ₹3,000 a month for each additional employment created.
Higher ceiling may affect PF deductions
The effect of the higher ceiling on employees will depend on their salary structures and the basis on which their provident fund contributions were previously calculated.
Under the earlier ₹15,000 ceiling, the maximum mandatory employee PF contribution was ₹1,800 a month when contributions were capped at the statutory limit. With the ceiling now at ₹25,000, the maximum contribution can increase to ₹3,000.
Employees who were previously contributing on the ₹15,000 ceiling could therefore see an additional ₹1,200 deducted from their monthly salary. The higher contribution, however, would increase their retirement savings.
The ministry has also said workers earning above ₹15,000 but below ₹25,000 in statutory wages will come under the Employees’ Pension Scheme.
The employee contributes 12% towards EPF, while 8.33% of the employer’s 12% contribution goes towards EPS and the remainder towards EPF.
The government expects the revised ceiling to broaden social security coverage and strengthen retirement, pension and insurance protection for eligible workers.
