Big news for the country’s salaried workforce. Following the decision to raise the mandatory wage ceiling under the Employees’ Provident Fund Organisation (EPFO) from ₹15,000 to ₹25,000, the Central Government has issued strict directives to companies and employers. The government has clarified that no company may reduce an employee’s ‘take-home’ salary as a result of this new rule. The primary objective is to ensure that employees receive the actual benefits of the increased Provident Fund (PF) contribution without it negatively impacting their monthly budgets.
What directives did the government issue to companies? The Ministry of Labour and Employment has instructed employers that there should be no reduction in employees’ take-home salary following the implementation of the increased wage ceiling under the EPFO. The government also aims to dispel apprehensions that the employer’s contribution might be adjusted against the employee’s Cost-to-Company (CTC) due to the raised wage limit.
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This government initiative aims to bring over 10 million additional employees under mandatory PF coverage and further formalize the country’s workforce. The Ministry has advised employers not to view their share of social security contributions merely as an additional expense, but rather as a means to ensure good human resource management, employee satisfaction, and long-term employee retention.
Employer costs may rise:
The Ministry has stated that the employer’s statutory Provident Fund (PF) contribution cannot be deducted from the employee’s salary simply by categorizing it as part of the ‘Cost-to-Company’ (CTC). The Ministry has clarified that employers must make their statutory contributions correctly without reducing the employee’s legitimate wages. In the issued FAQ, the Ministry has acknowledged that the implementation of the new system could lead to a slight increase in costs for employers. However, under the ‘Pradhan Mantri Viksit Bharat Rojgar Yojana’ (PMVBRY), an incentive of up to ₹3,000 per month is available for additional employment. The Ministry stated that this could help alleviate some of the additional financial burden on employers.
Instruction not to wait for the next payroll cycle:
Employers have been asked to immediately initiate the process of identifying and reviewing the affected employees. They have also been instructed not to wait for the next payroll cycle to do so. According to the ministry, identifying affected employees, calculating dues, registering names, reporting, depositing the required funds, and carrying out reconciliation should be treated as immediate priorities.
What happens if the salary is between ₹15,000 and ₹25,000?
For eligible employees earning a salary of more than ₹15,000 but less than ₹25,000, membership in the Employees’ Pension Scheme (EPS) will become mandatory. Under the new arrangement, the employee’s mandatory 12% contribution will go entirely to the EPF. On the other hand, the employer’s 12% contribution will be split into two parts: 8.33% will go to the EPS, while the remaining portion will be deposited into the EPF. As a result, a larger number of employees will be able to come under the social security and pension systems.
