Don't cut salaries: Ministry sends a missive to companies after new ₹25,000 EPF wage ceiling

New Delhi: The labour and employment ministry has directed employers to ensure employees' statutory wages are not reduced after implementation of the higher wage ceiling of ₹25,000 under the Employees' Provident Fund Organisation (EPFO).

The move is aimed at allaying apprehensions that the employers' share under the enhanced wage ceiling might be adjusted from the employees' cost to company.

Also Read: EPF wage ceiling history: How ₹300 became ₹25,000 and what it means for your salary


The government raised the wage ceiling under the EPFO to ₹25,000 from ₹15,000 on September 17 to bring more than 10 million additional workers under mandatory coverage and further drive workforce formalisation.

The ministry suggested that employers view their share of the social security contributions as a way to promote robust human resource practice, increasing employee satisfaction and retention.

"The employer's statutory contribution cannot simply be treated as an employee deduction merely by describing it as part of cost-to-company (CTC)," it said, adding that employers should ensure that statutory employer contributions are made correctly and that the employees' statutory wages are not reduced contrary to applicable law.

Also Read: When will higher EPF deductions appear in your salary slip?

In the frequently asked questions issued in this regard, the ministry admitted that there would be predictable increase in employers' cost.

"Employers can partly offset this additional financial burden by the incentive of up to ₹3,000 per month for every additional employment created under the Pradhan Mantri Viksit Bharat Rojgar Yojana (PMVBRY)," it said, adding that formalising the workforce also reflects well on India as an investment destination.

On the apprehension of decrease in take-home salary, the ministry clarified that any increase in employees' share of EPF due to an increase in the wage ceiling earns consistently better interest, comes with tax benefits, and builds towards a guaranteed pension and free insurance coverage, a small trade-off for lifelong security.

The ministry directed employers to start reviewing the affected employees and not wait for the next payroll cycle. "The immediate priority should be to identify, calculate, enrol, report, remit and reconcile," it said. It also clarified that all eligible workers with salaries above ₹15,000 but below ₹25,000 will be required to become a member of the Employees' Pension Scheme (EPS). The mandatory 12% of employee contribution will go entirely to the EPF while the employers' contribution of 12% will be split into 8.33% that goes towards EPS and the balance towards EPF.