Amid rising salaries across India, the government is reviewing the wage ceiling for contributions to the Employees' Provident Fund (EPF). The current wage ceiling, set at ₹15,000 per month in September 2014, has remained unchanged for over a decade, despite significant wage growth and inflation. This has led to a situation where a considerable portion of the workforce, particularly those earning minimum wages in several states, are excluded from mandatory EPF coverage.

The Supreme Court has intervened, directing the central government to make a decision on increasing the EPF wage ceiling within four months. This directive follows a plea highlighting that the existing limit excludes many workers from social security benefits. The court has asked the petitioner to submit a formal request to the government.

The government is now reconsidering increasing the wage ceiling to a range of ₹25,000 to ₹30,000 per month. Employee unions have long advocated for a higher threshold, arguing that the outdated ceiling weakens social security protection. However, previous discussions to raise the threshold to ₹25,000 were stalled due to resistance from employers, who expressed concerns about increased compliance costs unless contribution rates were reduced.

The implications of raising the wage ceiling are multifaceted. For employees currently earning below the proposed new ceiling (e.g., between ₹15,000 and ₹25,000), mandatory PF deductions would increase, potentially reducing their immediate take-home pay. For example, an employee earning ₹25,000 per month currently contributes ₹1,800 to EPF (12% of ₹15,000). If the ceiling rises to ₹25,000, the monthly contribution would increase to ₹3,000. However, this would also lead to a larger retirement corpus over time, with some experts estimating potential gains of ₹10-15 lakh over a 25-year career, assuming steady long-term returns.

Employers would also see an increase in their contribution costs. However, a higher wage ceiling could significantly expand the social security net, bringing millions of additional workers under mandatory provident fund coverage. As of FY24, the EPFO had nearly 74 million active contributing members, with approximately 320 million member accounts in total, including past contributors.

Furthermore, a higher wage ceiling could expand pension coverage under the Employees' Pension Scheme (EPS), but this would depend on whether the pensionable salary cap is also revised. Currently, EPS calculations are capped at ₹15,000.

The review of the EPF wage ceiling also aligns with the notification of the new labor codes, which emphasize clearer wage definitions and mandate that basic wages constitute at least 50% of total remuneration.

Experts note that increasing the EPFO wage ceiling would bring a larger segment of the workforce into the formal social security net. They also highlight that provident fund contributions enjoy an "EEE" status, where contributions, accruals, and withdrawals are exempt from tax, making EPF an efficient savings instrument.