New Delhi: Good news for private sector employees: the government is preparing a major initiative to bring millions of workers under the social security umbrella. Plans are underway to raise the Employees’ Provident Fund Organisation (EPFO) monthly salary limit from ₹15,000 to between ₹25,000 and ₹30,000.
What the Salary Limit Means
The salary limit determines the basic salary threshold on which contributions to the provident fund (PF) are legally mandatory. Under current rules, if an employee’s basic salary exceeds ₹15,000, contributing to PF is optional.
According to reports, the government had previously considered raising the limit to ₹25,000 but shelved the plan due to opposition from companies, which argued that it would increase their financial burden. Meanwhile, employee unions are advocating for a ₹30,000 limit. The current ₹15,000 threshold was set nearly a decade ago, in September 2014, and salaries have risen significantly since then. Recently, the Supreme Court directed the Labour Ministry to review the limit within four months.
Expected Benefits
Raising the salary limit is expected to significantly increase PF subscribers, particularly among workers in the unorganized sector. Officials note that higher contributions will allow employees to accumulate a substantial corpus by retirement, as larger amounts benefit more from compounding over time. Additionally, the EPFO has relaxed withdrawal rules, requiring subscribers to maintain at least 25% of their balance in their accounts, further strengthening retirement savings.
This move is seen as a key step in expanding social security coverage for private employees and ensuring better financial security in retirement.
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