Good News for Employees and EPFO Members: Salary Cap Likely to Increase from ₹15,000 to ₹21,000

In what could be a major development for salaried employees across India, the central government is reportedly considering raising the salary cap under the Employees’ Provident Fund Organisation (EPFO) from ₹15,000 to ₹21,000. If approved, this long-anticipated move will bring significant benefits to over 7.5 million workers, especially those previously excluded from pension benefits under the Employees’ Pension Scheme (EPS).

What the Proposed EPFO Salary Cap Hike Means

Currently, only employees earning a basic monthly salary of ₹15,000 or less are eligible for mandatory EPF and EPS coverage. Both the employee and employer contribute 12% each of the basic salary to the EPF, with 8.33% of the employer’s share going to the EPS, capped at ₹1,250 per month.

However, with the proposed revision to a ₹21,000 salary cap, a larger portion of the Indian workforce would gain eligibility for:

• Higher pension contributions

• Improved retirement security

• Greater EPF savings accumulation

Key Benefits of Raising the Salary Limit

If implemented, here’s what the increased cap could mean:

• Higher Pension Contribution: The EPS contribution cap will rise from ₹1,250 to ₹1,749, increasing the retirement corpus for eligible employees.

• More Employees Covered: Workers earning between ₹15,001 and ₹21,000, previously excluded from EPS, will now be included.

• Bigger EPF Corpus: Employees in this income range will contribute a larger amount, and employers will match it, leading to higher EPF savings.

• Increased Employer Responsibility: Companies will need to adjust their contributions accordingly, which may slightly increase operational expenses for businesses.

Government’s Role and Financial Impact

The central government currently allocates ₹6,750 crore annually for the EPS. A raise in the salary cap will require additional financial planning and allocations, as more employees will enter the EPS net. This move aligns with the government’s broader push to expand social security coverage, especially for workers in the semi-formal and formal sectors.

Final Word: What Should Employees Expect?

If approved, the change will likely be implemented in phases and will benefit lakhs of mid-level earners who were earlier left out of the pension scheme. Employees are advised to:

• Keep track of official announcements from EPFO and the Ministry of Labour

• Understand how changes will affect their monthly salary deductions

• Consult with HR or finance professionals to adjust financial planning