Major EPF Change: Will those earning ₹15,000 benefit or lose out?

If your basic salary is ₹15,000 and EPF is deducted monthly, this change is relevant to you. The government has decided to raise the wage ceiling for EPFO ​​and EPS coverage to ₹25,000. Here is what this means for you.

If you are an employee covered by the EPFO, this news is important for you. A significant change regarding EPF and EPS has recently been introduced for employees. The Central Government has decided to increase the mandatory wage ceiling for EPFO ​​coverage from ₹15,000 to ₹25,000 per month. This change is slated to come into effect on September 17.

If your combined Basic Salary and Dearness Allowance (DA) amount to ₹15,000, you might be wondering how the new EPF wage limit will affect your salary or PF deductions. Will your PF deduction increase, or will there be an impact on your in-hand salary? Let’s understand how this new wage ceiling will affect different employees.

What will be the impact on those earning ₹15,000?

For employees whose Basic Salary plus DA is ₹15,000 or less, this change will not result in any major shift. This is because these employees were already within the mandatory ambit of EPF and EPS. Therefore, merely raising the wage ceiling to ₹25,000 does not alter the coverage status for those earning ₹15,000.

Under the current system, both the employee and the employer contribute 12% each. Consequently, the PF deduction for those earning ₹15,000 will not suddenly increase just because the wage ceiling has been raised.

What are the benefits for those earning between ₹15,000 and ₹25,000?

This change will have a significant impact on employees whose Basic Salary plus DA falls between ₹15,000 and ₹25,000. According to the government, while such employees might previously have fallen outside the old threshold for mandatory EPF coverage, the implementation of this new limit will bring a larger number of employees under the ambit of EPF and EPS. The most significant benefit of this move is the potential enhancement of long-term social security—in the form of PF and pension—for employees' retirement.

What is the update regarding in-hand salary?

However, for employees coming under mandatory EPS coverage for the first time, PF-related deductions could impact their in-hand salary, depending on their salary structure. Since the EPF scheme involves a contribution from the employee as well, it would be incorrect to claim that there will be no impact on every employee's in-hand salary.