EPFO Update: Government Likely to Raise Minimum Salary Limit to ₹21,000—Here's What It Means for Employees

In a move that could benefit millions of salaried employees across India, the central government is reportedly considering increasing the minimum salary eligibility limit for EPFO (Employees’ Provident Fund Organisation) coverage from ₹15,000 to ₹21,000. While an official announcement is still awaited, media reports suggest that this long-awaited decision could be part of broader labor reforms and may coincide with post-election economic restructuring.

Why This Move Matters

Currently, employees earning up to ₹15,000 per month are mandatorily covered under the EPF (Employees’ Provident Fund) and EPS (Employees’ Pension Scheme). Raising this salary ceiling to ₹21,000 would expand coverage, allowing more employees—especially in the private sector—to enjoy long-term retirement and pension benefits.

If implemented, this would be the first increase in the minimum salary threshold for EPFO coverage since 2014, when it was last raised from ₹6,500 to ₹15,000.

Key Benefits for Employees

Increased Retirement Savings:
With a higher salary limit, more employees will qualify for mandatory EPF contributions, thereby building a larger retirement corpus.

Higher Pension Contributions:
Under the EPS scheme, 8.33% of the employer’s contribution (capped currently at ₹1,250 for ₹15,000 salary) is diverted to the pension fund.

• At a ₹21,000 salary cap, this would increase to ₹1,749, potentially leading to a higher pension payout after retirement.

Greater Social Security Coverage:
Sectors like small-scale industries, startups, and MSMEs, where many employees earn just over ₹15,000, could now bring more workers under the EPFO umbrella.

What It Means for Take-Home Pay

While the move is beneficial in the long term, there could be a short-term dip in in-hand salary. That’s because:

• Both the employee and employer contribute 12% of the basic salary to EPF.

• A higher basic salary for deduction means a larger chunk of the employee’s salary goes into savings, slightly reducing net monthly pay.

However, this deduction is fully credited to the employee’s provident fund account and earns interest annually, currently at a rate of 8.15% for FY 2023-24.

Potential Impact and What’s Next

• The change, if notified, would impact both employees and employers financially.

• Employers may need to update their payroll and HR systems, while employees will benefit from higher social security in the long term.

• No official confirmation has been issued yet by the Ministry of Labour and Employment or the EPFO.