Centre expands mandatory PF coverage: Employees earning up to ₹25,000 now included

The Centre has approved a significant expansion of India's formal social security framework by raising the wage ceiling for mandatory Employees' Provident Fund Organisation (EPFO) coverage from ₹15,000 to ₹25,000 per month.

The revision, announced following a Union Cabinet decision chaired by Prime Minister Narendra Modi, is expected to bring more than 5.1 million additional employees under mandatory EPFO coverage. The new threshold will take effect from 17 September, marking the first revision to the wage ceiling in 12 years.

The move broadens access to provident fund savings, pension benefits and insurance protection for workers who previously fell outside mandatory coverage because their wages exceeded the existing limit.

A wider social security net

According to information shared by Ashwini Vaishnaw, Union Minister for Information and Broadcasting, the revised ceiling will extend mandatory EPFO enrolment to employees earning between ₹15,000 and ₹25,000 a month.

Currently, employees earning basic wages of up to ₹15,000 are automatically covered under EPFO provisions, while those above the threshold can join only under specified conditions.

With the revised limit, eligible workers within the higher salary band will gain access to:

• Employees' Provident Fund (EPF) savings
• Employees' Pension Scheme (EPS) benefits
• Employees' Deposit Linked Insurance Scheme (EDLI) coverage
• Statutory retirement and social security protection

The decision comes at a time when the EPFO has 79.8 million contributing members across 768,000 establishments, according to the organisation's dashboard.

Government links reform to workforce formalisation

In a separate briefing, Mansukh Mandaviya, Union Minister for Labour and Employment, described the measure as a step towards expanding social security coverage and supporting employment formalisation under the Labour Codes.

"The decision will provide employees with the benefits of provident fund savings, pension and insurance protection," Mandaviya said.

He noted that the wage ceiling had remained unchanged since September 2014 despite rising wages, increasing minimum wage levels and higher living costs.

According to Mandaviya, the average income of a regular salaried employee is now around ₹23,000 per month, while minimum wages for even unskilled workers have crossed ₹15,000 in several states.

The revision addresses a long-standing gap where employees joining organisations at wages above ₹15,000 were not automatically covered by EPF and were also excluded from pension benefits under EPS.

What the change means for employers

The government said broader social security coverage could contribute to workforce stability, employee retention and long-term retirement security.

One practical outcome of the policy is likely to be a larger share of formally employed workers participating in retirement and insurance schemes.

Broader social security coverage is expected to strengthen workforce formalisation while increasing statutory contribution obligations across affected organisations.

According to the Ministry of Labour and Employment, wider coverage may also support morale and help employers build more secure and future-ready workforces.

Scale of the initiative

The proposal underwent inter-ministerial consultations and received approval from the Expenditure Finance Committee during its meeting on 16 June.

Government estimates indicate:

• Annual expenditure of approximately ₹11,339 crore
• Existing annual budgetary support of around ₹10,250 crore
• Estimated expenditure of approximately ₹56,696 crore over five years

The revised wage ceiling will take effect on 17 September, coinciding with Vishwakarma Diwas and Seva Diwas.

A larger role for EPFO

The EPFO operates one of the world's largest social security systems and administers three major schemes:

• Employees' Provident Fund (EPF)
• Employees' Pension Scheme (EPS)
• Employees' Deposit Linked Insurance Scheme (EDLI)

The EPS currently supports around 8.2 million pensioners, while EDLI provides insurance protection linked to EPF membership.

With the latest revision, the government is extending statutory retirement and social security benefits to millions of additional workers while reinforcing its broader objective of expanding formal employment coverage. For employers, the change introduces new compliance and cost considerations. For employees, it opens access to retirement savings, pension eligibility and insurance protection that were previously unavailable under mandatory coverage rules.